Bridge Loans Guide | Funding


What are bridge loans?

A bridge loan is a short-term form of financing that is used to meet a short term need before securing permanent financing. It can provide an urgent cash flow solution or “bridge” a gap in funds – hence the name.

These types of loans are usually used for buying and selling residential or commercial property. For instance, if you buy a residential property to live in before selling your current house, a bridge loan can assist. The bridge loan is repaid back as soon as you sell your home.

Bridging loan can be used by both consumer and business purposes.

This type of loan is typically an interest only home loan for a fixed term. The extent of amount you can borrow is calculated on the equity in your current property.

How do bridge loans work?

  • Lenders use your property or properties as security and provide a short term loan to you.
  • You will typically have an exit or repayment plan to exit the loan and repay the funding.
  • Business owners and companies use bridge loans to finance working capital and cover expenses as they wait to secure long-term financing.

Types of bridge loans

 There are four types of bridge loans:

  1. Closed Bridge Loans: This loan is available for a predetermined time frame that has already been agreed on by both parties. The closed bridge loans are more likely to be accepted by lenders because it gives them a higher certainty about the loan repayment. The interest rates are usually lower for closed bridging loan as compared to open bridging loan.
  2. Open Bridge Loan: Open bridge loan repayment method is undetermined at the initial inquiry and there is no fixed pay off date. This type of loan is preferred by borrowers who are uncertain about when their expected finance will be available. Lenders tend to charge a higher rate of interest for this type of bridging loan due to uncertainty on loan repayment.
  3. First Mortgage Bridge Loan: A first charge bridging loan gives the lender a first charge over the property. In case of default, the first charge bridge loan lender will receive its money first before other lenders. The loan attracts lower interest rates than the second charge bridging loans due to the low level of underwriting risk.
  4. Second Mortgage Bridge Loan: A second charge bridge loan gives the lender the second charge after the existing first charge lender. These loans are for shorter loan term period, usually less than 12 months. Since they carry a higher risk of default, therefore attract a higher interest rate.


  • Allows you to secure a property or opportunity that you would otherwise miss.
  • Flexible criteria and uses.
  • Speedy process compared to a traditional loan.
  • Bridge loans allow for flexible repayment terms.


  • Typically, a higher interest rate is charged on bridging loans compared to a long term mortgage provided by the banks.
  • If you default on your loan obligations, the lender could foreclose on the security property.

Things to consider

  • Be realistic about how much you can sell your current property for.
  • When comparing products from different lenders, always consider the total cost of the loan, rather than just the interest rate.
  • Always consider how the loan will be repaid upfront and make sure the proposed exit strategy is viable.
  • Consider the costs if you repay early or late.

Learn more about Funding’s bridging loans or get an obligation free express quote today.

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Property loans for all purposes.

We lend to individuals and companies looking for short to medium term loans for any purpose. We take a common sense approach to lending and can often assist when the banks cannot.

  • Purchase, refinance or cash out.
  • Urgent bridging loans and short term loans.
  • Business and personal loans.
  • Vacant land.
  • Cash out & ATO Debts.
  • Commercial property.
  • Non-residents, bad credit or self employed.


The obligation free conditional approval will outline all rates and fees. It is tailored to your specific loan needs.

The loan to value or LVR is the maximum lend secured over the property. Our typical LVR is 65% or lower of the property value. On some occasions, 70% may be considered depending on the location and type of security property.

Loan terms are typically between 1 and 36 months.

Residential, commercial and vacant land. In all metropolitan areas in all states.

Borrowers can be individuals, companies or trusts borrowing for any purpose including personal or business. Borrowers must have sound real estate security, the ability to meet their repayments and a strong repayment strategy to exit the loan at the end of the term.