How bridging loan costs work

Bridging loans are typically short-term facilities designed to cover the gap between buying and selling.

During this period, the loan may include:

  • your existing loan balance
  • the new purchase price
  • associated costs (stamp duty, fees, etc.)

Key cost components:

  • interest on the total loan during the bridging period
  • higher rates compared to standard home loans (in some cases)
  • lender fees and valuation costs
  • potential legal or discharge fees

In many scenarios, interest may be capitalised (added to the loan) rather than paid monthly – but this depends on the lender and structure.

The total cost is heavily influenced by how long the bridging period lasts.

What lenders require for bridging finance

Bridging loans are not automatic – lenders assess them carefully.

Typically, lenders will require:

  • a realistic estimate of your current property value
  • an expected sale price (often conservatively assessed)
  • sufficient equity across both properties
  • a clear exit strategy (how the loan will be repaid)
  • acceptable loan-to-value ratio across the combined exposure
  • evidence of servicing (especially if there is end debt)

Some lenders are more flexible. Others take a conservative approach – particularly around sale price and timing.

Choosing the wrong lender can significantly impact whether the deal works.

Key risks with bridging loans

Bridging finance introduces additional variables that need to be managed properly.

1. Sale price risk

If your property sells for less than expected, your final loan position may be worse than planned.

2. Time-to-sell risk

If your property takes longer to sell, the bridging period extends – increasing costs and pressure.

3. Servicing pressure

Depending on the structure, you may need to service both loans or demonstrate capacity to do so.

4. Valuation risk

Lender valuations may come in lower than expected, impacting borrowing capacity or structure.

5. Lender policy risk

Different lenders treat bridging scenarios very differently. A poor fit can limit options or result in decline.

Most of these risks can be managed – but only with the right structure and assumptions.

Common mistakes borrowers make

Many bridging scenarios become difficult due to avoidable errors.

Common issues include:

  • overestimating sale price of the existing property
  • underestimating time required to sell
  • not understanding whether there will be end debt
  • assuming interest or repayments will be minimal
  • choosing a lender without understanding their policy
  • not having a clear or realistic exit strategy

In most cases, the problem isn’t the strategy – it’s the execution.

How we structure bridging loans at Evolve

We approach bridging finance as a risk-managed strategy, not just a loan.

This typically involves:

  • assessing realistic sale price ranges (not just best case)
  • modelling different time-to-sell scenarios
  • reviewing equity and borrowing capacity across both properties
  • determining whether end debt or no end debt is appropriate
  • identifying lenders suited to your specific scenario
  • structuring the loan to manage risk during the bridging period
  • aligning the timing of purchase and sale
  • avoiding unnecessary pressure or forced decisions

The objective is to give you flexibility – without exposing you to avoidable risk.

Speak with a broker before proceeding

Bridging finance can be effective – but only when it’s structured properly.

Before proceeding, it’s worth understanding:

  • what the total cost is likely to be
  • how long you may need the bridging period
  • what risks apply to your scenario
  • how lenders will assess your position

A clear plan upfront can significantly reduce risk and improve your outcome.

Speak with Evolve Lending & Finance to review your structure and next steps.