How bridging works in NSW
Bridging finance covers the gap between buying a new property and selling your existing one. While both properties are owned, the lender takes security over both, usually by registered mortgages lodged with NSW Land Registry Services. Your total borrowing at that point is called the peak debt. When the old property sells, the sale proceeds reduce the loan to the end debt, which is what remains on the new home.
Banks and private lenders both offer bridging finance. Banks usually require you to show you can afford the end debt from your income. Private lenders tend to focus more on the property values and your sale plan, and may lend where income evidence is limited, at a higher cost.
Transfer duty timing in NSW
Buying in NSW carries transfer duty, collected by Revenue NSW. Revenue NSW says duty must be paid by the earliest of the settlement date or three months after signing the contract, and it is usually paid through a solicitor or conveyancer on settlement day. Lenders rarely lend against duty, so you need to have that cash available or include it in your bridging plan. Use the NSW stamp duty page to estimate it.
If you are buying off the plan or in a long settlement, ask your conveyancer when duty is due for your contract, since the timing can differ.
Sale periods in Sydney and regional NSW
The main risk with bridging finance is that your old property takes longer to sell, or sells for less, than you planned. Sale times vary across Sydney suburbs and between Sydney and regional NSW, and from season to season. Build a buffer of a few months into your bridging term and assume a cautious sale price.
Lenders will usually ask for a valuation of both properties. Some also want your property listed with an agent before they settle.
Typical scenarios in NSW
Example only, not a real client. A couple in Sydney's west find a larger home and sign the contract before listing their current house. A bridging loan funds the purchase and the transfer duty from savings, with the old house listed straight away and a twelve-month maximum term.
Example only, not a real client. A retiree in Newcastle is downsizing and wants to move into a new unit before selling the family home. Because their income is limited, a private lender offers a short bridging loan secured over both properties, with the sale proceeds as the exit.
Costs to compare
Bridging loans can charge interest in different ways. Some add interest to the balance during the bridging period, which increases the end debt. Others require monthly payments. Ask each lender for:
- the rate during the bridging period and after it ends;
- establishment, valuation and legal fees;
- how interest is charged and what the end debt will be at different sale prices;
- costs if the sale takes longer than the term.
Model your figures with the bridging calculator and compare total costs in the loan cost estimator.
Land tax while you hold two properties
If you own both properties on 31 December, NSW land tax may apply to the one that is not your home, depending on its land value and the exemptions that apply. Ask your accountant or check with Revenue NSW, especially if your sale is likely to cross that date. See land tax in NSW.
Choosing between bridging and other options
Bridging is not the only way to buy before you sell. You can negotiate a longer settlement, make the purchase subject to your sale, or use a short-term property finance facility. Read bridging finance explained for the national picture and compare it with a caveat loan in NSW if you only need a small sum for a short period.
Questions for a NSW lender
- What is the maximum peak debt and end debt you will lend?
- How is interest charged during the bridging period?
- What happens if my sale has not settled by the end of the term?
- Will you lend if my current property is not yet listed?
- Can I repay early without a fee?