Bridging finance glossary

Bridging loan

Short-term finance, usually six to twelve months, that funds a property purchase before an existing property has sold. Repaid in full from the sale proceeds.

Capitalised interest

Interest added to the loan balance rather than paid monthly. Preserves cash flow during the term but increases the amount owing at the end.

Closed bridging

A facility where the exit is already contracted — your existing property is under an unconditional contract with a known settlement date. Cheaper and easier to approve than open bridging.

Combined LVR

The loan-to-value ratio calculated across both properties together, rather than each in isolation. The figure most bridging lenders actually limit, typically to around 80%.

Comparable sales

Recent sales of similar nearby properties, used by a valuer to establish market value. The evidence base for both your sale price and the lender's valuation.

Discharge

The formal release of a mortgage over a property once the debt is repaid, allowing clear title to pass to a buyer.

End debt

What remains owing after your existing property sells and the proceeds are applied. Usually converts to a standard mortgage on the new property.

Establishment fee

An upfront fee for setting up the facility, commonly expressed as a percentage of the loan amount. Often capitalised into the loan.

Exit strategy

The documented plan for repaying the loan at the end of its term — most often the sale of your existing property, sometimes a refinance.

First mortgage

A mortgage ranking ahead of all others over a property. First-mortgage security attracts lower rates than second-mortgage security.

Interest-only

A structure where only interest is payable during the term, with the principal repaid at the end. Most bridging facilities are interest-only or fully capitalised.

LVR

Loan-to-value ratio: the loan divided by the property value, expressed as a percentage. The primary measure of how much equity supports the debt.

Open bridging

A facility taken out before your existing property is under contract. Higher risk to the lender, so priced higher and usually written over a longer term.

Peak debt

The highest total owing during the transaction — existing mortgage plus new borrowing plus fees and capitalised interest. Interest accrues on this figure.

Presentation costs

Money spent preparing a property for sale — painting, styling, landscaping, minor repairs. Sometimes included in the facility where it will lift the sale price.

Private lender

A non-bank lender funding from private or wholesale sources. Faster and more flexible than a bank, generally at a higher rate.

Refinance exit

Repaying a bridging loan with a conventional term loan rather than a sale. Common in renovation and construction cases.

Registered valuation

An independent assessment of market value by a qualified valuer, ordered by the lender. Almost always required before formal approval.

Second mortgage

A mortgage ranking behind an existing first mortgage over the same property. Riskier for the lender and priced accordingly.

Security

The property or properties over which the lender takes a mortgage. Bridging facilities are typically secured over both the outgoing and incoming property.

Servicing

The assessment of whether your income can support the ongoing repayments — in bridging, applied mainly to the end debt rather than the bridge itself.

Settlement

The legal completion of a property transaction, when title transfers and funds change hands.

Settlement gap

The period between settling a purchase and settling a sale, during which you own both properties and hold peak debt.

Simultaneous settlement

Both transactions completing on the same day, removing the gap entirely. Where achievable, cheaper than any bridging facility.

Term

The life of the facility, usually six or twelve months. Chosen to match the realistic selling period, with margin.

Valuation shortfall

Where a valuer assesses a property below the expected figure, reducing borrowing capacity and sometimes requiring the loan to be restructured.

Common questions

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