Bridging Loan Cost: Interest, Fees and Repayments

Bridging loan cost is the interest charged while both properties are held, plus lender fees and the costs of buying and selling. The amount borrowed and the sale settlement date drive the interest bill. Capitalising interest reduces payments during the bridge but increases the debt left after sale.

To estimate how much bridging finance will cost, calculate the balance before sale, add interest as it accrues and subtract net sale proceeds. Separate the cost of the bridge from property costs you would pay whichever route you choose.

Identify Every Bridging Cost

A complete bridging budget separates financing charges from property transaction costs and ongoing household expenses. Each cost needs an amount, a payment date and a funding source.

Cost	What to put in the budget	Treatment in the fictional example below
Interest	Each loan balance, annual rate, days outstanding and interest payment method	Added monthly to the consolidated facility
Application or establishment fee	The charge for arranging the facility	$2,000 financed
Valuations	Charges for assessing both properties	$800 financed
Lender legal and document costs	Loan documents and security work	$1,200 financed
Loan settlement costs	Lender settlement and registration charges	$1,000 financed
Buying costs	Transfer duty, purchase conveyancing and other purchase charges	$40,000 financed as one separate allowance
Selling costs	Agent commission, marketing and sale conveyancing	$24,500 deducted from sale proceeds
Discharge costs	Loan discharge and security release charges	$500 deducted from sale proceeds
Other holding costs	Insurance, rates, utilities and maintenance for the extra property	External household budget, excluded from the numerical example

The financed lender fees total $5,000, and the selling and discharge allowance totals $25,000. Those fictional totals include any applicable tax. They are not quotes or current lender offers.

Fee categories are real, but each product has its own schedule. As at October 2026, Westpac’s home loan fee schedule separates establishment, document processing, valuation and discharge charges. The schedule lists a separate bridging loan entry with its own charges.

A deposit paid before settlement comes from available cash in this example. Count it once within the total cash contribution. Paying a fee upfront also reduces cash available for settlement unless you have budgeted separate funds for it.

If the existing loan is fixed, include any applicable break cost in its payout. Include lenders mortgage insurance (LMI) only where the proposed facility actually requires it. Neither is assumed in this example.

Model Peak and End Debt

Peak debt is the highest total debt before the sale proceeds arrive. End debt is the balance left after those proceeds repay the facility.

This fictional residential example assumes the lender approves a consolidated facility that refinances the existing debt and capitalises all interest. It assumes sufficient security and an affordable ongoing loan. It is not an example of a named lender’s product.

Use the bridging loan requirements guide for the broader structure and the bridging eligibility guide for qualification. A business bridging loan needs a different assessment.

All amounts below are Australian dollars. The fictional purchase settles on 1 June 2027 and the sale settles on 1 September 2027, giving 92 interest-bearing days. The illustrative bridge rate stays at 8% per annum throughout.

Starting input	Amount
Existing mortgage payout at purchase settlement	$300,000
New property purchase price	$1,000,000
Buying costs	$40,000
Financed lender fees	$5,000
Cash contribution, including any deposit already paid	-$145,000
Opening consolidated debt	$1,200,000
Expected gross sale price	$900,000
Selling and discharge costs	-$25,000
Net sale proceeds available to repay the consolidated facility	$875,000

The opening calculation is $300,000 + $1,000,000 + $40,000 + $5,000 - $145,000 = $1,200,000. The opening balance already includes the old mortgage payout. Do not deduct that old mortgage again from the $875,000 sale proceeds.

With the monthly interest calculation below, peak debt reaches $1,224,360.25. End debt is $1,224,360.25 - $875,000 = $349,360.25. Keep the cents through the calculation and round only the final displayed result.

The bridge incurs $24,360.25 interest and $5,000 lender fees, totalling $29,360.25 in financing costs. Buying and selling costs add another $65,000. The combined financing and transaction budget is $94,360.25, excluding the purchase price and external holding costs.

The loan principal is funding, rather than a fee. The $145,000 cash contribution reduces borrowing but does not reduce the price of the properties or services purchased.

Calculate Interest Through the Bridge

Calculate interest on the debt outstanding for each day, then apply the product’s charging and payment rules. Capitalised interest is unpaid interest added to the mortgage balance. Later interest can then accrue on that higher balance.

As at October 2026, IMB Bank’s bridging finance page specifies daily interest calculation with monthly charging. CommBank’s bridging loan page, also read in October 2026, describes the same calculation frequency. Their repayment requirements differ.

The fictional facility uses annual rate divided by 365, with interest added at each calendar month-end. It has no offset balance, repayments or further draws. June contributes 30 days, July 31 and August 31.

Period	Opening balance	Calculation	Interest added	Closing balance
June	$1,200,000.00	$1,200,000 × 0.08 × 30 ÷ 365	$7,890.41	$1,207,890.41
July	$1,207,890.41	Opening balance × 0.08 × 31 ÷ 365	$8,207.04	$1,216,097.45
August	$1,216,097.45	Opening balance × 0.08 × 31 ÷ 365	$8,262.80	$1,224,360.25

A flat simple-interest estimate gives $1,200,000 × 0.08 × 92 ÷ 365 = $24,197.26. Monthly capitalisation adds $162.99 because earlier interest remains outstanding. A monthly approximation using annual rate divided by 12 does not reproduce these calendar-day totals.

The lender debits charged interest to the account. When the client pays that interest, it stops adding to debt. Capitalised interest stays in the balance and increases the eventual payout.

Draw timing also changes cost. Funding $100,000 twenty days later reduces simple interest by $100,000 × 0.08 × 20 ÷ 365 = $438.36. Monthly capitalisation changes the final saving slightly because later balances also change.

For a rate change, split the affected period at its effective date. A one percentage point increase for 31 days adds about $1,200,000 × 0.01 × 31 ÷ 365 = $1,019.18 on a constant balance. Recalculate subsequent capitalised balances as well.

Explain Repayments Before and After Sale

Bridging loan repayments depend on whether the lender requires interest payments or allows interest to be capitalised. Existing and ongoing loans can still require payments while the bridge runs.

As at October 2026, CommBank requires interest-only payments on its bridging loan. After sale, repayments continue on the remaining home loan under the chosen repayment type. Its repayment explanation therefore requires a cash-flow budget during the bridge.

As at October 2026, IMB Bank capitalises interest on the new bridging loan without requiring repayments on that loan during the bridging term. It still requires minimum repayments on existing IMB loans for the old property. Its bridging conditions do not make every loan payment disappear.

In our consolidated example, the client makes no interest payments before sale. If the same fictional balance instead had interest paid monthly, June’s interest payment would be $7,890.41. July and August would each require $8,153.42, assuming principal stays at $1,200,000.

That paid-interest version leaves $325,000 after the $875,000 sale repayment. It costs $24,197.26 in interest paid from cash. The capitalised version leaves $349,360.25 and costs $24,360.25 in accrued interest.

For the capitalised version, assume the end debt converts to principal-and-interest repayments over a fresh 25-year term at a fictional 6% per annum. This is a separate assumption from the 8% bridge rate. The calculated monthly repayment is about $2,250.93.

Use the repayment formula P × r ÷ [1 - (1 + r)^(-n)]. Here P is $349,360.25, r is 0.06 ÷ 12 and n is 300 monthly payments. An actual remaining term of less than 25 years increases the repayment at the same rate.

Test Sale and Timing Sensitivity

A lower sale price increases end debt immediately. A delayed settlement adds interest even when the sale price stays the same.

The fictional client wants end debt no higher than $380,000 and monthly repayments no higher than $2,450. Those are client planning limits, not lender approval thresholds. The repayment calculations retain the fictional 6% rate and 25-year term.

Scenario	Peak debt	Net sale proceeds	End debt	Monthly repayment
Base: $900,000 sale after 92 days	$1,224,360	$875,000	$349,360	$2,251
Sale price falls to $850,000	$1,224,360	$825,000	$399,360	$2,573
Sale settles on 1 December, after 183 days	$1,248,943	$875,000	$373,943	$2,409
Extra $4,000 fee financed at the start	$1,228,441	$875,000	$353,441	$2,277
All three changes occur	$1,253,106	$825,000	$428,106	$2,758

The lower sale price alone breaches both client limits. The six-month sale alone stays within them but leaves only about $6,057 below the debt ceiling. In the combined case, both limits are exceeded substantially.

For the base timing, net sale proceeds must reach $1,224,360.25 - $380,000 = $844,360.25 to meet the debt limit. With $25,000 selling costs, the minimum gross sale price is $869,360.25. At 183 days, that minimum rises to $893,943.06.

Use sale settlement as the repayment date, rather than the auction or contract date. If settlement moves beyond the lender’s agreed bridge term, the original exit plan fails even when the end debt arithmetic still looks affordable. An extension is not automatic.

Compare the Cost With Other Routes

Bridging finance can be a good idea when buying first has enough value to justify its cost and the stressed sale still leaves manageable debt. It is expensive when a large balance stays outstanding or the sale proceeds fall short.

Compare routes over the same 92-day period from 1 June to 1 September. Keep the $1,000,000 purchase price, $900,000 sale price, $65,000 property transaction costs and $145,000 available cash unchanged. The alternatives below are fictional, with no price appreciation or investment return assumed.

Route	Fictional additional financing or transition cost in the period	Position on 1 September
Buy first with the worked bridge	$24,360 interest + $5,000 lender fees = $29,360	End debt $349,360
Sell on 1 June and buy on 1 September	$7,800 temporary rent + $3,000 extra moving/storage + $1,000 loan fee = $11,800	End debt $320,000, with loan fee paid separately
Align both settlements on 1 September	$4,000 purchase-price premium + $1,000 loan fee + $4,537 old-loan interest = $9,537	End debt $324,000, with loan fee paid separately
Refinance both debts and pay interest during the overlap	$18,148 interest at 6% + $5,000 financed lender fees = $23,148	End debt $325,000

For selling first, $875,000 net sale proceeds less the $300,000 mortgage releases $575,000. Add $145,000 cash and subtract that $720,000 from the $1,040,000 purchase and buying-cost total. The resulting loan is $320,000.

The aligned-settlement route assumes the seller accepts a $4,000 premium to delay the purchase. The existing $300,000 loan continues at a fictional 6% rate for 92 days, costing $4,536.99 paid from income. The premium increases the new loan to $324,000.

The refinancing route assumes approval for the full $1,200,000 balance at 6%, with monthly interest paid from income and a permitted property release on sale. Its interest is $1,200,000 × 0.06 × 92 ÷ 365 = $18,147.95. Refinancing alone does not create permission to defer repayments or release security.

External holding costs are excluded from all totals. The loan fees paid separately and all rent, moving costs and interest payments require funds beyond the $145,000 purchase contribution. Include them in the household cash-flow budget before treating an alternative as affordable.

Selling first requires temporary accommodation and gives up ownership of the chosen new property during the interval. Aligned settlements depend on both counterparties agreeing dates. Buying first avoids those timing constraints but exposes the client to the stressed end debt.

For lender policy questions, Bulma quotes the policy wording behind its answers, which a broker can retain in file notes. It does not quote interest rates or fees. Use the actual loan offer and settlement estimates for the cost model, then compare each route against the client’s debt ceiling and available cash.