The problem a bridge solves
Commercial timing rarely lines up. A settlement date falls before a sale completes. A site must be secured before a construction facility is documented. A bank refinance is approved but weeks away while a facility expires. A bridge lets the borrower act on the deadline and repay when the money lands.
How bridges are structured
Security is a first or second mortgage over the property being sold, the property being bought, or both. Interest is commonly capitalised so nothing is serviced during the term — important where the borrower is already carrying other debt. The facility is usually interest-only with a single balloon repayment at the exit.
Lenders size a bridge so that the loan balance at the end of the term, including capitalised interest and fees, still sits comfortably within an acceptable LVR.
What determines approval
The exit is everything. An exchanged contract with an unconditional purchaser is the strongest case. A property freshly listed with an agent and no offers is the weakest. Between them sit refinance approvals, pre-sales and contracted receivables.
A sensible bridge has a term longer than the expected exit, so a short delay does not become a default. Asking for three months when the realistic sale timetable is five is how borrowers end up paying default interest.
Key points
- A bridge funds a timing gap, not an ongoing shortfall.
- Repaid in one event: sale, refinance or contracted proceeds.
- Interest is often capitalised so nothing is serviced monthly.
- Strength of the exit drives approval and pricing.
Frequently asked questions
How long should I take the bridge for?
Longer than your realistic exit timetable. Building in buffer is far cheaper than defaulting and negotiating an extension.
Can I bridge without a signed sale contract?
Often yes, at a lower LVR and higher rate, supported by agent appraisals and evidence of market demand.
What happens if my sale falls through?
You would typically seek an extension, refinance, or reprice the asset. Extensions are discretionary and attract fees, so it is safer to plan a secondary exit at the outset.