Assessing a Bridging Loan Application
Bridging loans help upgrading clients move without needing to sell first. Assessing them well means handling peak debt, end debt, and sale timing with care.
Calculating peak debt
Peak debt is the combined balance of the existing home loan, the new purchase loan, and any capitalised interest during the bridging period. Calculate peak debt precisely because it determines the LVR against the combined security value during the bridging period.
Projecting end debt
End debt is the loan balance after the existing property has sold and the proceeds have been applied. The end debt must service as a standard home loan, which sets a cap on the new purchase based on the expected sale price of the existing property.
Managing the sale timeline
Most bridging loans allow six months to sell the existing home for an established property and up to twelve months for a construction. If the property does not sell within the period the loan usually reverts to a standard home loan, which may then fail serviceability. Realistic sale expectations are central to the assessment.
Key takeaways
- ✓Calculate peak debt accurately including capitalised interest
- ✓Project end debt and confirm standard serviceability
- ✓Set realistic expectations for the sale of the existing home
- ✓Understand the fallback if the property does not sell in time
How QualifyMate helps
QualifyMate reads the existing home loan statements and surfaces balances and repayment data brokers can combine into a peak debt view when modelling a bridging finance scenario.
Key terms
Bridging Finance
A short term loan that funds the purchase of a new property before the sale of an existing property has settled.
Loan to Value Ratio (LVR)
The loan amount expressed as a percentage of the property value, used by lenders to assess risk on a home loan.
Serviceability
A lender assessment of whether a borrower can meet loan repayments from their income after accounting for expenses, existing debts, and a buffer.
Related guides
Reviewing Existing Home Loan Statements
How to review existing home loan statements for refinance and top up applications. Balance, rate, repayment type, and redraw checks.
Assessing a Refinance Application
How to assess a refinance application in Australia. Reasons to refinance, break costs, and funds to complete calculations.
Assessing a First Home Buyer Application
A practical approach to assessing first home buyer applications in Australia. Genuine savings, grants, and LMI considerations.
Preparing Submission Notes for Home Loan Applications
How to prepare clean submission notes for Australian home loan applications. Structure, tone, and the information assessors need.
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