What is a Bridging Loan?
A bridging loan is a short-term secured finance facility designed to cover temporary funding requirements, typically ranging from one to twelve months. Unlike conventional property finance that extends over decades, bridging facilities are structured for speed and flexibility. Lenders focus primarily on your exit strategy—how you intend to repay the loan—rather than your ongoing capacity to service monthly repayments. There are two main types: Closed bridging loans (where you have a confirmed sale date) and Open bridging loans (where the sale date is not yet confirmed).
Assess Your Financial Position
Before applying, calculate your equity position. Most bridging loans require 20-50% equity in your current property. Determine your Peak Debt—the maximum borrowing calculated as 80% of combined property values minus the expected sale price. You should also have a clear exit strategy documented, whether through property sale, refinancing, or capital raising.
Prepare Documentation
Gather essential documents including: proof of identity (passport or driving licence), proof of Australian citizenship or residency, current income and employment details, bank statements and financial records, details of current and proposed properties, sale contract (for closed bridging), and evidence of property listing (for open bridging). Property developers may also need feasibility studies and quantity surveyor reports.
Choose Your Lender
Major banks offer lower rates (6.5-8.5% p.a.) but have stringent criteria and longer approval times. Non-bank lenders charge higher rates (9-10% p.a.) but offer faster approvals—some can pre-approve within hours and settle in 48 hours. Private lenders provide the fastest access but at premium pricing (up to 18% p.a.). The right choice depends on your timeline, documentation, and credit history.
Application and Approval
Submit your application with all required documentation and a clear loan repayment plan. A property valuation will be conducted (typically 3-5 business days). Your solicitor will receive the lender's checklist of requirements. Once approved, you'll receive a binding offer with 7 days to review. Upon acceptance and satisfactory report on title, funds can be transferred to your solicitor within 24 hours.
Current LVR Requirements (2025)
Residential bridging: 70-80% LVR standard. Commercial property: 65-75% LVR typical, up to 80% maximum. SMSF lending: 60-70% LVR. Prime commercial (medical centres, childcare): 70-80%, up to 90% with strong tenant covenant. Cross-collateralised deals typically require below 65% across all securities. Lower LVR means better rates and more lender options.
Interest Rates and Fees
Major banks: 6.5-8.5% p.a. Non-bank lenders: 9-10% p.a. Specialist/higher-risk: up to 18% p.a. Monthly equivalents range from 0.5-1.5%. Establishment fees typically 2-3% of loan value. Valuation fees: $300-$800+ per property. Legal/settlement fees: $500-$2,000+. Some lenders waive early repayment fees (CommBank, Westpac). With strong applications and LVRs under 60%, brokers can often negotiate 0.1-0.3% monthly reductions.
Common Use Cases
Buying before selling: Purchase your new property before your existing property sells. Auction purchases: Fund unconditional contracts with 30-day settlements. Property development: Secure building sites while awaiting planning approvals. Property flipping: Quickly acquire undervalued properties, fund renovations before resale. Commercial transitions: Business premises relocation or industrial site acquisition. Renovation properties: Finance properties that are "un-mortgageable" on day one.
Risks and How to Mitigate Them
Key risks include: higher interest costs (1-3% above standard mortgages), double loan burden during bridging period, property sale delays, and market value decline. Mitigation strategies: Don't borrow to the maximum—stay well below 80% LVR. Have a clear exit strategy documented. Build in time buffers (expect sales to take longer). Discuss contingency plans with your lender before signing. Maintain cash reserves for potential extended periods.
The Andorra Private Advantage
Our team maintains relationships with diverse bridging lenders—from major banks to specialist private funders. We match your specific requirements with appropriate funding partners, negotiate competitive terms, and guide you through the entire process. Whether you need a 48-hour settlement for an auction purchase or a longer-term solution while transitioning between properties, we find the right structure for your situation.
Ready to Explore Your Options?
Our team can help you understand which financing solution is right for your situation.