Bridging Loans – Are They Breaking the Bank? (2026)

Buying a new home before selling your existing one can be a stressful juggling act. Whether you're upgrading, downsizing, or simply moving to a different area, the timing rarely works out perfectly. This is where bridging loans come in, offering a financial lifeline to ease the transition. But are bridging loans expensive? Let's dive into the details to help you make an informed decision.

Understanding Bridging Loans

Bridging loans are short-term financing solutions designed to 'bridge' the gap between the purchase of a new property and the sale of your existing one. They can be particularly useful if you find your dream home but haven't yet sold your current property. Unlike traditional mortgages, bridging loans are typically used for a short period, often ranging from a few weeks to 12 months. They can offer peace of mind and flexibility, but they do come with costs that need careful consideration.

Are Bridging Loans Expensive?

Bridging loans can indeed be more expensive compared to standard home loans, primarily because they are short-term and carry a higher risk for lenders. As of 2026, the interest rates for bridging loans in Australia typically range from 6.49% to 12% per annum. This is substantially higher than the average home loan rates, which can be between 4.5% and 6.5%.

Additional costs may include establishment fees, valuation fees, and legal fees, which can add up quickly. It's crucial to weigh these costs against the benefits of securing your new home without the pressure of an immediate sale.

How to Secure a Bridging Loan

Securing a bridging loan involves several steps:

1. Assess Your Financial Situation: Calculate your current equity and outstanding mortgage. This will determine the amount you can borrow.
2. Contact a Mortgage Broker: A broker can help you navigate through options. Esteb and Co, with access to over 83 lenders, can provide a range of choices tailored to your needs.
3. Choose the Right Loan Structure: Decide between a closed bridging loan, which has a set repayment date, or an open bridging loan, which doesn't.
4. Prepare Documentation: Gather documents such as proof of income, current mortgage details, and your new property's purchase contract.
5. Submit Your Application: Your broker will submit your application to lenders on your behalf.
6. Review Your Loan Agreement: Once approved, review the loan agreement carefully, paying close attention to interest rates and fees.

Tips and Considerations

Here are some expert tips to consider when thinking about a bridging loan:

• Plan for Contingencies: Market conditions can change, affecting your ability to sell your existing home quickly. Have a backup plan for extended loan duration.
• Evaluate Costs: Make a realistic assessment of all costs involved, including potential penalties for delayed sale or early repayment.
• Consider Only When Necessary: If your current home is likely to sell quickly, a bridging loan might not be necessary. Explore all options before committing.
• Consult with Experts: Leverage the expertise of mortgage brokers like those at Esteb and Co to understand complex terms and conditions.

Frequently Asked Questions

• What is the typical term for a bridging loan? Most bridging loans are for 6-12 months, but terms can vary depending on your lender and circumstances.
• Can I get a bridging loan with bad credit? While more challenging, some lenders may approve bridging loans for those with less-than-perfect credit. Expect higher interest rates and more stringent conditions.
• Are there alternatives to bridging loans? Alternatives include selling your home first, obtaining a home equity loan, or securing a line of credit.
• What happens if my home doesn't sell in time? You may need to negotiate an extension with your lender, which could incur additional costs.
• Do I need a deposit for a bridging loan? Typically, no additional deposit is required as the loan is secured against your existing property.
• How is the interest calculated? Interest is usually calculated daily on the outstanding balance and can be capitalised until the loan is repaid.
• What documents are required? You'll need proof of income, existing mortgage details, purchase contract for the new property, and identification.