Bridging finance lets you buy your next apartment before you sell your current home.
When the apartment you want becomes available but your sale settlement is weeks or months away, a bridging loan provides the deposit and purchase funds using both properties as security. You repay the loan when your existing property settles, typically within six to twelve months.
How Bridging Finance Works for Apartment Purchases
A bridging loan uses the equity in your current home plus the value of the apartment you're purchasing as combined security. The lender calculates how much you can borrow based on the total value of both properties, minus what you still owe on your existing mortgage. Most lenders will approve a loan to value ratio up to 80% across both securities, though some will extend to 90% in specific situations.
Consider a buyer who owns a house in Mount Eliza valued at $1.1 million with $400,000 remaining on the mortgage. They find an apartment near Canadian Bay Road listed at $750,000. The lender assesses the combined property value at $1.85 million, calculates 80% of that figure at $1.48 million, and subtracts the existing $400,000 debt. The buyer can access up to $1.08 million in bridging finance, enough to cover the apartment purchase, settlement costs, and a buffer for the bridging period. Interest on the bridging loan is capitalised monthly, meaning it's added to the loan balance rather than paid from your pocket during the bridging term.
The Cost Structure of a Bridging Loan
Bridging finance costs include a variable interest rate typically 1% to 2% higher than a standard home loan, monthly capitalised interest, and establishment fees. Some lenders charge a line fee calculated as a percentage of the bridging loan amount, usually between 0.5% and 1%. Settlement costs apply to both the apartment purchase and the eventual sale of your existing property.
The bridging period runs from when you settle on the new apartment until your existing home sells and settles. A six month bridging loan will cost less in capitalised interest than a twelve month term, but choosing a realistic timeline matters more than choosing the shortest one. If your current property needs preparation or the market is slower, a longer term reduces the pressure to accept a lower sale price. Lenders assess your exit strategy during the bridging loan application process, including whether your property is already listed, its condition, and current market activity in your area.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Bayland Finance today.
When Bridging Finance Makes Sense in Mount Eliza
Bridging finance suits buyers who have significant equity in their current home and need to move quickly on a property that won't wait. In Mount Eliza, where apartment stock is limited compared to Mornington or Frankston, waiting until your house sells may mean losing the opportunity. The suburb's older demographic and downsizer demand mean quality apartments near the village or waterfront often attract multiple offers within days of listing.
You'll need enough equity to cover both the new purchase and sustain two properties during the bridging term. This includes ongoing costs like body corporate fees, council rates, and insurance on the apartment while still covering your existing mortgage. The strategy works when your sale timeline is reasonably predictable and you're confident in your property's appeal to buyers.
Approval Requirements and LVR Limits
Lenders assess bridging finance using the combined loan to value ratio across both properties, your income, and your ability to service both loans if the sale is delayed. Most require a clear exit strategy, which usually means your existing property is listed with an agent or will be listed within 30 days of settlement on the new purchase. They'll also assess whether the property is priced realistically based on recent comparable sales in your suburb.
The bridging loan security includes both your current home and the apartment you're purchasing. If your combined LVR exceeds 80%, you may need to pay lenders mortgage insurance, which adds to the upfront cost. Some lenders will approve bridging finance at higher LVRs if you have strong income and a property that's likely to sell quickly, but this depends on their appetite for risk and your overall financial position. A mortgage broker in Mount Eliza can assess which lenders will consider your scenario before you formally apply.
Alternatives to Bridging Finance
Selling your existing home first removes the need for bridging finance but requires temporary accommodation and storage during the transition. Some buyers negotiate a longer settlement period with the apartment seller, giving them time to sell before the purchase completes. Others use family loans or access equity through a standard refinance if they don't need the full purchase amount immediately.
Each option has trade-offs. Selling first means you lose the ability to make unconditional offers on apartments, which weakens your position in competitive scenarios. Extended settlements depend entirely on the seller's willingness and aren't available at auction. Family loans avoid lender fees but introduce personal risk. Refinancing your current home to release equity works if you can service the higher loan while holding both properties, but it doesn't provide the same speed or structure as a dedicated bridging product.
Setting a Realistic Bridging Period
The bridging loan term should reflect how long your property will realistically take to sell and settle, not how quickly you hope it might happen. A Mount Eliza home in good condition near the village or with bay views may sell within weeks during spring, but a property requiring updates or located further from amenity may take three to six months to find the right buyer.
Your agent's appraisal, recent sales data, and current stock levels all inform this decision. If you set a six month term but your property takes eight months to sell, you'll need to extend the bridging loan, which incurs additional fees and interest. Lenders typically allow one extension, but they'll reassess your financial position and may require the property to be reduced in price. Choosing a twelve month term from the outset gives you room to prepare the property, market it properly, and negotiate without pressure.
Call one of our team or book an appointment at a time that works for you to discuss whether bridging finance suits your situation and how the numbers apply to your purchase.
Frequently Asked Questions
How does bridging finance work when buying an apartment?
Bridging finance uses the equity in your current home plus the value of the apartment you're buying as combined security. You borrow enough to purchase the new apartment and repay the loan when your existing property sells, usually within six to twelve months.
What does a bridging loan cost?
Bridging finance costs include a variable interest rate typically 1% to 2% higher than standard home loans, capitalised monthly interest, establishment fees, and sometimes a line fee of 0.5% to 1% of the loan amount. Settlement costs apply to both the purchase and your eventual sale.
What loan to value ratio do lenders allow for bridging finance?
Most lenders approve bridging finance up to 80% LVR across both properties combined. Some will extend to 90% LVR in specific situations, but this may require lenders mortgage insurance and depends on your income and exit strategy.
How long should my bridging loan term be?
Your bridging period should reflect how long your property will realistically take to sell and settle, typically six to twelve months. A longer term reduces pressure to accept a lower sale price, though it increases the total interest cost.
What are the alternatives to bridging finance?
Alternatives include selling your home first and renting temporarily, negotiating a longer settlement with the apartment seller, using family loans, or refinancing to release equity. Each option has different trade-offs in terms of cost, timing, and negotiating position.
