Buying property can feel straightforward until the timing doesn’t line up. Mike and James discuss buying property using bridging loans, explaining why upgrading, downsizing, or seizing an opportunity can often become more complicated than expected.
Buying Property in 2026: Why Bridging Loans Exist
When buying property, most homeowners assume they’ll sell their existing home before buying the next one. In reality, lining up settlements isn’t always that simple. Sometimes you need to buy a new house before selling your current one – and that’s where bridging loans come in.
Bridging finance is essentially a short-term loan that helps you “bridge” the gap between owning two properties. While some people can avoid this by settling both properties on the same day (known as a contemporaneous settlement), bridging loans are usually needed when dates don’t align or when a quick settlement is required to secure a property.
Another common scenario is when a seller accepts a higher offer with a longer settlement. If one buyer can settle today for $1 million and another can settle in two months for $1.2 million, the extra $200,000 can make sense – but bridging finance may be required to make it work.
Open vs Closed Bridging Loans
There are two main types of bridging loans to consider when buying property.
Open bridging finance is when you have a confirmed purchase date for your new property but no definite sale date for your existing home. This is the option most people want and the hardest to get. Banks now need to prove you can afford both loans at the same time, which is often unrealistic. In many cases, open bridging is only approved if the existing property can realistically be held as a rental.
Closed bridging finance is far more common and easier to obtain. This is when you have confirmed sale and purchase dates. For example, buying a new property on 1 February and selling your current home on 14 February. Because the bridge only runs for a short, defined period, costs are known upfront and limited to a small window of interest.
Mike explains this using the concept of the “top” and “bottom” of the bridge. At the peak, you temporarily carry the maximum debt from owning both properties. Once the existing home is sold, the debt reduces again, completing the bridge.
Costs and Risks to Understand
Interest is usually the first cost people think about, but it’s not the only one. Bridging loans often involve additional finance costs, legal fees, and potentially holding costs such as rates and insurance – especially if an open bridge runs longer than expected.
Bridging finance works best when people are realistic and run the numbers properly. It can go wrong when sale price expectations are inflated or when emotional attachment leads people to hold out for a price the market won’t pay. In an open bridging situation, delays can quickly turn into significant interest costs, making it more expensive to wait than to accept a lower sale price.
Closed bridging, by comparison, carries less uncertainty because timelines and costs are fixed from the start.
Key Takeaways
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Bridging loans help when you need to buy before selling
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Contemporaneous settlements can avoid bridging altogether
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Open bridging is harder to get and carries more risk
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Closed bridging has defined dates and known costs
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Unrealistic sale expectations are a common pitfall
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Running the numbers early is critical
Next Steps:
If you’re thinking about upgrading, downsizing, or buying before you sell, talk to the Lighthouse Mortgages team early – a 15-minute chat can save you months of stress and costly mistakes.
If you’d like to watch more, check out these other episodes below.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
