Buying Before You Sell in a Falling Sydney Market: How Bridging Finance Really Works

The question I'm getting more than any other right now

Every second conversation at the moment starts the same way. "We've found the place we want, but our current home hasn't sold. Do we buy first, or do we sell first?"

Eighteen months ago that question almost answered itself. Stock was tight, buyers were competing, and if you listed your place it was usually gone in a few weeks at a price you were happy with. Selling first was the safe move, because the sale was the easy part.

That has changed. Cotality has Sydney dwelling values down about 1.2% in June and roughly 3.2% over the June quarter, leaving them around 3.7% below their January peak, with the median dwelling value near $1.27 million. Auction clearance rates have been sitting in the 50s, against a long-run average closer to 64% and around 77% this time last year. Total listings are up roughly 12% year on year, and the median vendor discount in Sydney has widened to about 4%.

Translated: there is more to buy, buyers have room to negotiate, and selling is no longer the automatic part of the equation. Which is exactly when bridging finance stops being a niche product and starts being the thing that makes a move possible. I spent eight years in lending, including time at CBA, before becoming a broker, and it's one of the structures I get asked to explain most. So here it is, plainly.

What a bridging loan actually is

A bridging loan lets you own two properties for a short window. You buy the new home before the old one has settled, and the lender funds the gap until the sale money arrives.

Two terms do all the work here, and if you understand them you understand bridging.

• Peak debt is the most you owe at the top of the arrangement: your existing mortgage, plus the new purchase price, plus stamp duty and costs, plus the interest that accrues while you hold both. It's a big number, and seeing it for the first time is confronting.
• End debt is what you're left with after your old property sells and the net proceeds are applied. This is the loan you actually live with, and it's the number that matters.

During the bridging period the loan is almost always interest only, and with most lenders the interest is capitalised - added to the balance rather than paid monthly - so you aren't making two full repayments at once. CommBank and Westpac both cap the term at 12 months; some lenders sit closer to six.

What it looks like with real numbers

Say your current home is worth around $1,400,000 with $400,000 still owing, and you're buying at $1,800,000 with roughly $84,000 of stamp duty and costs.

• Peak debt: $400,000 + $1,800,000 + $84,000 = about $2,284,000
• Combined security: $1,400,000 + $1,800,000 = $3,200,000, so peak LVR lands near 71% - comfortably inside the 80% most banks want to see
• Interest: if it takes five months to sell, at a bridging rate around 9.4% p.a. that's roughly $89,000 capitalised onto the balance
• Sale: the old home sells for $1,350,000, and after agent and legal costs you net about $1,316,000
• End debt: $2,284,000 + $89,000 - $1,316,000 = around $1,057,000 against an $1,800,000 home, which is an LVR near 59%

That's a workable outcome. Now change one input. If the old home sells for $1,250,000 instead, your end debt climbs to roughly $1,154,000 - about $97,000 worse, on a property you were always going to buy anyway. Nothing else in the deal changed. That single number is the whole risk of bridging in a falling market, and it's why the sale price you assume matters more than the rate you're quoted.

What it costs

Bridging is priced above a standard home loan, and you should expect that. Westpac, for example, is advertising a bridging rate around 9.4% p.a. at the time of writing, and steps it up by a further 1.00% after the first three months - a deliberate nudge to get the old place sold. On the example above that's peak debt accruing somewhere around $18,000 a month, which is the real cost of a slow sale, and the reason I push clients hard on pricing the old property to sell rather than to test the market. On top of that you're carrying two sets of council rates, insurance and strata, plus application and valuation fees on the new facility.

What lenders want to see before they'll do it

Bridging is assessed more tightly than a standard purchase, because the bank is carrying two properties against one household's income. In practice they'll be looking at:

• Real equity in the property you're selling. Peak LVR generally needs to sit under 80% across both securities.
• A credible exit. Evidence the old home will genuinely sell inside the term: realistic pricing, an agent appraisal, and a property type and location that actually moves. Unusual or rural properties are harder.
• Servicing. Many lenders assess you on the end debt rather than peak debt, which is what makes bridging viable at all. Some want you to cover interest on the full peak debt, and a few want the bridging interest sitting in savings. That difference often decides whether a deal works.
• A buffer. If the numbers only stack up when the old home sells at the very top of the appraisal range, the structure is too tight for this market.

Bridging isn't the only way to do it

It's worth knowing the alternatives before you commit to one.

• Sell first, then buy. No bridging risk, but you may need a rental in between and you'll move twice. In a market with this much stock, the fear of selling and having nothing to buy is far less founded than it was in 2021.
• A longer settlement. Often the cheapest answer of all. Negotiate a 90 or 120-day settlement and use that window to sell. Vendors are noticeably more flexible on terms right now, and terms are usually easier to win than price.
• Simultaneous settlement. Both transactions settle the same day. Elegant when it works, stressful when either side slips, and it needs both solicitors aligned from day one.
• A deposit bond. Covers the 10% deposit when your cash is locked up in the unsold home. It doesn't help you fund the purchase itself.

Getting it right

• Price the old home on today's market, not last year's. This is the single most common reason a bridging loan runs long. Get two agent appraisals and plan off the more conservative one.
• Model the downside, not the hope. If your end debt still works when the sale lands 8% below appraisal, the structure is sound. If it doesn't, you're relying on a market that isn't currently cooperating.
• Treat the interest as compounding, not a flat fee. A three-month overrun on a $2.28 million peak debt is real money.
• Ask what happens if it doesn't sell in time. Lenders can apply a default rate or strip discretionary discounts once the term expires. Find out before you sign, not after.
• Shop the structure, not just the rate. Whether a lender assesses you on end debt or peak debt changes your answer far more than a 0.2% difference in rate.
• Keep your credit file clean. No new car loans or card limits between approval and settlement. Lenders re-check, and a bridging file has no slack in it.

The honest read

A softer market isn't a bad time to upgrade. If you're selling a $1.4 million home and buying an $1.8 million one, a market that's down 3% costs you about $42,000 on the sale and saves you about $54,000 on the purchase. The gap you're bridging is smaller than it was - that's the quiet advantage of trading up in a downturn.

What has changed is the margin for error. With the cash rate at 4.35% after three rises this year, the next RBA decision due on 11 August, and Sydney homes taking a little over a month to sell on average, bridging needs to be built on conservative assumptions. Done properly it's a genuinely useful tool. Done on last year's price expectations, it's an expensive way to find out the market has moved.

If you're weighing up buying before selling, I'm always happy to have a free, no-obligation chat and run the real numbers on your situation - peak debt, end debt, and what it looks like if the sale comes in under expectations. With access to more than 70 lenders, I can tell you which ones structure bridging in a way that suits your position, and which ones won't touch it.

This is general information only and not personal financial advice - everyone's situation is different, so please get in touch and we'll look at yours together. Interest rates, property values and lender policy all change, so treat the figures here as a snapshot in time. For stamp duty and contract questions please speak to your solicitor or conveyancer, and for anything tax-related your accountant or a licensed adviser.

Ready to take the next step?

Book a free 30-minute consultation with William. No fees, no obligation — just expert advice tailored to your situation.

Bridge Finance

© 2026 Bridge.Finance Pty Ltd ATF Zhu Family Trust. Credit Representative 567817 of Australian Credit Licence 384704. MFAA Member. AFCA Member.

Get in touch

Ready to take the next step?

Whether you're just starting your property search or ready to apply, we'd love to help. Reach out for a free, no-obligation chat and find out what's possible for your situation.

Follow along on TikTok (@williamzhufinance) for property tips, market insights, and honest mortgage advice.

Address

217 Burwood Road, Burwood NSW 2134, Australia

Contacts

0492 949 169

[email protected]