Bridging finance until a property sells

Property sales take time. A campaign runs for weeks, a buyer needs finance, and even after exchange there is a settlement period to wait out. Meanwhile, the business need doesn’t pause: a supplier wants paying, the ATO wants its balance, or another opportunity needs a deposit.

A bridging loan secured on property lets you use the value of a sale before it settles. The sale repays the loan, so the loan simply moves the money forward in time.

How does bridging finance work when you’re selling a property?

The lender takes a first mortgage, second mortgage or caveat over the property being sold, and sometimes another property for extra support. You use the funds for your business purpose. When the sale settles, the loan is paid out from the proceeds before the balance comes to you.

Three things make or break a bridging loan:

• The realistic sale price, not the hoped-for one.
• What’s already owing on the property, including any bank loan that must also be cleared at settlement.
• The sale’s stage and timing, because that is the exit.

Interest is usually capitalised, so there may be nothing to pay until the sale settles. See how that affects the payout on prepaid or capitalised interest.

How do lenders view the stage your sale has reached?

The closer the sale is to settlement, the stronger the exit and the simpler the loan.

Sale stage	How strong the exit is	What the lender looks for
Thinking of selling	Weakest	A credible plan, agent appraisal, time buffer
Listed with an agent	Fair	Listing agreement, price guide, campaign dates
Offer accepted, not exchanged	Better	Buyer’s details, offer terms, finance status
Exchanged, conditions outstanding	Strong	Contract, conditions and their deadlines
Exchanged, unconditional	Strongest	Contract and settlement date

Even a listing that hasn’t drawn an offer can support a bridging loan, as long as the loan is sized conservatively and the term leaves room. In NSW, for example, the NSW Government notes settlement usually takes place around six weeks after exchange, so build that gap into the timeline even after you have a buyer.

Our guide to the exit strategy for a short-term mortgage explains how to present a sale exit a lender will believe.

What can slow the sale and delay your exit?

Plenty of bridging loans run late not because the property didn’t sell, but because of avoidable admin. Watch for these:

• The ATO clearance certificate. Australian resident sellers must give the purchaser a clearance certificate at or before settlement, and from 1 January 2025 this applies whatever the property’s value. Without one, the purchaser must withhold part of the sale price and pay it to the ATO, and you only get it back after your tax return is processed. The ATO says processing can take up to 28 days and recommends applying as soon as you are thinking of selling. Certificates last 12 months.
• Land tax timing. In NSW, land tax is based on what you own at midnight on 31 December, and selling early in the next year doesn’t reduce that year’s bill. If a sale slips past that date, you may hold the property for another land tax year.
• Title issues. Old caveats, unregistered easements or a missing discharge can hold up settlement. Ask your solicitor to search the title at the start.
• The buyer’s finance. If the buyer’s contract is subject to finance, the timeline is partly in their bank’s hands.

Should the loan sit on the property being sold or another one?

Usually the property being sold, because its settlement repays the loan automatically. But there are good reasons to add, or switch to, another title:

• Thin equity in the sale property. If the bank loan already takes most of the expected price, a second property can support the bridging amount.
• A first mortgagee that won’t consent. Some bank mortgages restrict second mortgages; a caveat or mortgage over another property avoids the issue.
• A sale price that is uncertain. Spreading security across two titles protects you if the campaign disappoints.

When a second property is involved, its security is released once the sale settles and the loan is repaid. See how lenders treat multiple properties as security.

How long should a bridging loan run?

Pick a term that covers the sale’s realistic timeline plus a buffer. A private first mortgage runs for 1 to 24 months; second mortgages and caveat loans are typically shorter.

• Exchanged, unconditional sale: a short term, matched to the settlement date with a few weeks’ margin.
• Listed but unsold: longer, to allow for the campaign, a possible re-launch and a settlement period.
• Not yet listed: longer again, and expect the lender to size the loan conservatively.

Our page on short-term first mortgages covers how the term is chosen.

What does a bridging loan look like in practice?

Illustrative example: a Perth landscaping company director owns an investment house worth around $880k with $300k owing, and lists it for sale. The business needs $250k now to pay overdue suppliers and secure equipment for a council contract. A $280k second mortgage over the house is arranged for nine months, with interest capitalised. The house sells after a seven-week campaign and settles six weeks later. At settlement the bank is paid out, the second mortgage is discharged from the proceeds, and the balance goes to the director. The clearance certificate, applied for when the house was listed, is handed over at settlement, so nothing is withheld.

The business got its money four months early, and the sale did exactly what it was always going to do.

If your sale is under way, ask a specialist about bridging against it.

What happens to the loan at settlement?

On settlement day, the sale and the loan payout happen together in the electronic workspace:

1. Your solicitor obtains a payout figure from the lender, including capitalised interest.
2. The buyer’s funds arrive and are distributed according to the settlement statement.
3. Any bank first mortgage is paid out, then the bridging loan.
4. Mortgages and caveats are discharged, and the balance is paid to you.

Our guide to what happens at settlement walks through each step.

Key terms

• Bridging loan: a short-term loan repaid from a known future event, usually a sale.
• Clearance certificate: the ATO document that stops withholding from a resident seller’s sale proceeds.
• Payout figure: the amount needed on settlement day to clear the loan in full.
• Exit: for a bridging loan, the sale of the property.

Selling a property? See if you qualify

Your first enquiry involves no credit check. A real specialist reads it, considers the property and the sale’s progress, and responds personally; your details aren’t sent out to a roll call of lenders. Our lending partner fundU lends directly and assesses the property itself.

Tell us the property, what is owing on it, the sale stage and what the funds are for. Precise answers about the property and its debts get you the right answer first time. Start your 60-second enquiry.