What bridging finance covers in emergency purchase scenarios
Bridging finance provides temporary funding to purchase property before you've sold your existing home. It allows you to proceed with a purchase when the settlement dates don't align, or when you need to act quickly on an opportunity that can't wait for your current property to sell.
The finance sits alongside your existing mortgage for a short period, typically three to twelve months, until your current property sells and you repay the bridging portion. Lenders assess both properties when determining how much they'll advance, with the combined loan to value ratio across both securities being the main constraint on borrowing capacity.
Consider a scenario where you've found a property in Runcorn that meets your needs, but your current home in Rochedale hasn't sold yet. Rather than miss the opportunity or rush to sell below value, bridging finance lets you proceed with the purchase. Once settled, you can market your existing property without pressure, then repay the bridging component when that sale completes.
How quickly lenders approve bridging applications
Approval speed depends on whether you already hold a mortgage with the lender providing the bridging finance. Internal bridging arrangements, where your current lender extends additional funds secured against both properties, can receive conditional approval within 48 to 72 hours if your application is complete and both properties meet standard lending criteria.
External bridging applications, where you're using a new lender, typically take five to seven business days for conditional approval. Settlement can occur within two to three weeks if valuations are completed promptly and both properties are in metropolitan areas where valuer availability is higher.
The Runcorn market includes a mix of established homes and townhouses, mostly built between the 1970s and 1990s, with some newer developments near Warrigal Road. Properties in this suburb generally value without complication, which helps keep approval timeframes on track. If you're looking at bridging finance for a purchase in the area, working with a mortgage broker in Runcorn who understands local lender preferences can reduce delays in the valuation and assessment stage.
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Bridging finance costs and how interest is managed
Bridging loan interest rates sit above standard variable rates, typically by 1% to 2%, reflecting the short term nature and additional risk lenders carry during the transition period. Most lenders capitalise the interest, meaning it's added to the loan balance each month rather than requiring monthly payments. This avoids the cash flow strain of servicing two full mortgages simultaneously.
Application fees for bridging finance range from $500 to $1,500 depending on the lender and loan amount. Some lenders also charge an establishment fee or higher valuation costs since two properties need to be assessed. Exit fees are uncommon on bridging arrangements, but you should confirm this before proceeding as it affects the total cost if your property sells earlier than expected.
In our experience, buyers underestimate the holding costs during the bridging period. If you're borrowing an additional amount for three months with capitalised interest, the actual interest cost might be modest, but if the sale of your existing property is delayed to six or nine months, those costs accumulate. Having a realistic timeline for selling your current property is more important than securing the lowest possible rate on the bridging portion.
LVR limits and how much you can borrow across both properties
Lenders calculate the loan to value ratio across both the property you're purchasing and the property you're selling. Most lenders cap the combined LVR at 80%, though some will extend to 85% or 90% if you pay lenders mortgage insurance. The calculation works by adding your new purchase price to your existing mortgage balance, then dividing that total by the combined value of both properties.
If your existing property has significant equity, bridging finance becomes more accessible. If equity is limited, you may need to contribute additional funds to keep the combined LVR within acceptable limits. Lenders will also assess your ability to service both loans if the sale is delayed, so income and existing commitments play a role in approval.
When structuring bridging finance applications, having an exit strategy is non-negotiable. Lenders want to see that your current property is realistically priced and marketable within the proposed bridging period. If you're purchasing in Runcorn and selling in a neighbouring suburb with slower turnover, that affects how lenders view the application and may result in a shorter approved bridging term.
Alternatives when bridging finance doesn't suit your situation
If your combined LVR exceeds what lenders will accept, or if the holding costs don't align with your cash flow, a deposit bond can be an alternative for certain purchase scenarios. This allows you to exchange contracts without immediate funds, giving you time to sell your existing property before settlement. Deposit bonds work when the settlement period is long enough to sell, but they don't suit situations where you need to settle quickly.
Another option is negotiating a longer settlement period with the vendor. If the seller isn't in a rush, extending settlement by 60 or 90 days might give you enough time to sell without needing bridging finance at all. This approach works better in private sales than auctions, where settlement terms are usually fixed.
For buyers with available funds or family support, contributing a larger deposit from savings and treating the existing property as investment property after the purchase can avoid bridging finance altogether. This shifts the structure from temporary bridging to a permanent investment loan, which has different tax and financing implications but removes the urgency to sell.
Structuring your bridging loan and planning the exit
The bridging term you nominate should reflect a realistic sale timeline, not an optimistic one. Most lenders offer terms from three to twelve months, with six months being the most common. If your property hasn't sold by the end of the approved term, you'll need to apply for an extension, which incurs additional fees and isn't guaranteed if market conditions have changed or your financial position has shifted.
Your exit strategy should include a clear marketing plan for the property you're selling, ideally with an agent already engaged before you settle on the new purchase. Lenders often ask for evidence that the property is listed or about to be listed as part of the approval process. Waiting until after settlement to start marketing adds unnecessary risk to the bridging period.
Refinancing the bridging loan into a standard mortgage is possible if your sale falls through or if you decide to retain the property as an investment, but this depends on your income being sufficient to service both loans on an ongoing basis. This option should be discussed upfront so you understand whether it's available if circumstances change. If you're considering how refinancing might work as a fallback, that conversation should happen during the initial application, not three months into the bridging term when your sale hasn't progressed.
When bridging finance makes sense and when it doesn't
Bridging finance works when the property you're buying represents genuine value or meets a specific need that can't be deferred, and when your existing property is saleable within a reasonable timeframe. It suits buyers who have strong equity positions and stable income, and who are prepared for the possibility that their sale might take longer than anticipated.
It doesn't suit buyers who are already stretched financially, or where the property being sold is difficult to move due to location, condition, or price expectations. If your existing mortgage is close to the property's value, or if you're relying on a best-case sale price to make the numbers work, bridging finance introduces too much risk.
Runcorn's proximity to the Gateway Motorway and Sunnybank makes it appealing for families and investors, and properties in well-maintained condition typically attract interest within a reasonable timeframe. If your existing property has similar characteristics in terms of location and presentation, bridging finance becomes more viable. If you're selling a property in a slower market or one that needs work before it can sell, the risk profile changes.
If you're weighing up whether bridging finance suits your circumstances, call one of our team or book an appointment at a time that works for you. We'll assess your equity position, review both properties, and structure an application that reflects the actual timeline and costs involved.
Frequently Asked Questions
How quickly can bridging finance be approved for an urgent property purchase?
Internal bridging applications with your current lender can receive conditional approval within 48 to 72 hours if your documentation is complete. External applications with a new lender typically take five to seven business days, with settlement possible within two to three weeks depending on valuation turnaround.
What is the maximum LVR lenders will accept for bridging finance?
Most lenders cap the combined loan to value ratio across both properties at 80%, though some will extend to 85% or 90% with lenders mortgage insurance. The calculation includes your new purchase price and existing mortgage balance divided by the total value of both properties.
How is interest charged on a bridging loan?
Bridging loan interest rates typically sit 1% to 2% above standard variable rates. Most lenders capitalise the interest, adding it to the loan balance each month rather than requiring monthly payments, which avoids the cash flow pressure of servicing two mortgages at once.
What happens if my existing property doesn't sell within the bridging term?
You'll need to apply for an extension, which incurs additional fees and isn't guaranteed if your financial position or market conditions have changed. Alternatively, you may be able to refinance the bridging loan into a standard mortgage if your income can service both loans permanently.
What are the alternatives to bridging finance if my LVR is too high?
Alternatives include using a deposit bond if settlement can be delayed, negotiating a longer settlement period with the vendor, or contributing a larger deposit from savings and converting your existing property to an investment loan rather than selling immediately.
