Bridging finance explained
How closed and open bridging differ, and what each costs.
Bridging Loan Calculator
Buying before you sell means carrying both properties for a while. This works out your peak debt, the interest that capitalises during the bridge, and the end debt you are left servicing.
Is that number right for your situation?
A calculator applies one formula. Lenders apply their own, and they disagree with each other. Send us what you worked out and we will tell you how it looks against real lender policy.
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Peak debt and end debt
Peak debt is everything you owe at the high point: your existing mortgage, the price of the new property, and the purchase costs. End debt is what remains once your old home sells and the net proceeds are applied. Lenders assess both, and plenty of applications pass one test and fail the other.
Peak debt decides whether a lender will do the deal at all. End debt decides whether you can live with the outcome, because that is the loan you keep. Full detail is on our bridging finance page.
Why the months figure matters most
On most bridging facilities you make no repayments during the bridge. Interest is capitalised, meaning it is added to the balance instead of paid. That protects your cash flow while you carry two properties, and it is also what hurts people, because the interest accrues on peak debt, the largest balance you will ever owe.
Change the months field from three to nine and watch the end debt move. If the deal only works on a fast sale at a good price, it is not a deal, it is a bet. If it still works on a slow sale at a lower price, bridging is a reasonable risk.
Cheaper alternatives to check first
Negotiating a longer settlement on the purchase, or a simultaneous settlement, removes the need for a bridge entirely and costs nothing but negotiation. Selling first and renting briefly removes the risk altogether and puts you in a stronger buying position. And if you have substantial equity, releasing it may be cheaper than bridging; see the usable equity calculator.
We raise these with almost everyone who asks about bridging, because bridging is often the answer to a question that has a cheaper answer.
Common questions
Usually not. Interest capitalises onto the balance instead. That is easier on cash flow and more expensive overall, which is why the length of the bridge matters so much.
Your end debt rises by the shortfall. Run the calculator again at a price you would actually accept in a slow market rather than your asking price, and see whether the result is still serviceable.
Commonly six to twelve months, with the shorter end applying when your existing home has not yet sold. Extensions are sometimes possible but should not be assumed at the planning stage.
No. A deposit bond covers the deposit at exchange so no cash moves until settlement. It solves a much smaller problem far more cheaply. Where a deposit bond is enough, bridging is unnecessary.
Buying before you sell?
We will model the slow-sale scenario and tell you if a longer settlement would do the job instead.
Related
Usable equity calculator
Often a cheaper way to fund the next purchase.
Buying a second property
Upsizing, downsizing and holding two at once.