The Pros and Cons of Bridging Loans for Apartments

Bridging finance lets you buy your next apartment before you settle the sale of your current property.

For nurses and midwives moving between apartments, this structure solves the timing problem that forces many buyers to either rent temporarily or lose the property they want. You access the equity in your existing apartment to fund the deposit and costs on the new one, then repay the bridging component once your old property settles. The entire arrangement typically runs for six to twelve months, depending on how quickly your sale completes.

How Bridging Finance Works When You Purchase an Apartment

A bridging loan uses the equity in your current apartment as security for the deposit on your next one. The lender assesses your borrowing capacity across both properties during the bridging period, then recalculates your loan once the sale settles and the bridging component is repaid. Most lenders capitalise the interest on the bridging portion, which means you do not make separate repayments on that amount until settlement. Your existing home loan repayments continue as normal throughout the bridging period.

Consider a registered nurse working at the Royal Adelaide Hospital who owns a two-bedroom apartment in Adelaide CBD. She finds a three-bedroom apartment in North Adelaide and exchanges contracts before her existing property has sold. The lender advances a bridging loan to cover the deposit and costs on the North Adelaide purchase, secured against the equity in her Adelaide CBD apartment. She lists her CBD apartment, accepts an offer four months later, and repays the bridging loan at settlement. During those four months, interest on the bridging component accrues and is added to the loan balance, while her original home loan repayments continue unchanged.

The LVR calculation during the bridging period includes both properties. If the combined LVR exceeds 80 percent, you may need to pay Lenders Mortgage Insurance or access an LMI waiver if your lender offers one for registered nurses or midwives. Once your original apartment settles, the bridging loan is repaid and your LVR is recalculated based only on the new property.

Interest Costs and Capitalisation During the Bridging Period

Interest on bridging finance is typically higher than standard variable home loan rates. Lenders price bridging loans to reflect the additional risk of carrying two properties, and most allow you to capitalise the interest rather than requiring monthly repayments. Capitalisation means the interest is added to your loan balance each month and repaid in full when your original property settles.

If you hold the bridging loan for six months and the interest rate is 1 to 2 percent above your standard variable rate, the total capitalised interest depends on the size of the bridging component. On a bridging amount that covers a deposit, the capitalised interest over six months will typically add several thousand dollars to your final loan balance. The longer the bridging period runs, the more interest accrues. This is why most lenders cap bridging loans at twelve months and require a clear exit strategy before approving the facility.

You continue to make principal and interest repayments on your existing home loan throughout the bridging period. The bridging component sits separately and accrues interest without requiring immediate repayment. Once your original apartment settles, the sale proceeds repay the bridging loan in full, including all capitalised interest.

LVR Limits and Security Requirements Across Two Properties

Lenders assess your total borrowing across both properties when calculating the LVR for a bridging loan. If the combined LVR sits below 80 percent, you avoid paying LMI. If it exceeds 80 percent, you either pay the premium or access a waiver if you meet the eligibility criteria as a registered nurse or midwife.

Westpac, St.George, and Bank of Melbourne all offer LMI waivers for nurses up to 90 percent LVR, subject to a minimum income threshold. If your combined LVR during the bridging period pushes you above 80 percent but remains below 90 percent, and you earn above the threshold, the waiver can save you several thousand dollars in insurance premiums. Once your original property sells and the bridging loan is repaid, your LVR drops to reflect only the new apartment, and the waiver is no longer required if your ongoing LVR sits below 80 percent.

Some lenders require both properties to be located in metropolitan areas or within certain postcode ranges. If your existing apartment is in a regional location or a postcode the lender considers higher risk, they may decline the bridging application or reduce the maximum LVR. This is more common for apartments in buildings with known defects, high investor concentrations, or locations outside the lender's metropolitan lending area.

Exit Strategy and What Happens If Your Property Does Not Sell

Every bridging loan approval requires a documented exit strategy. The lender needs evidence that your existing apartment is listed for sale, priced appropriately, and likely to sell within the bridging term. If your property does not sell within the agreed timeframe, the lender may extend the bridging period for a fee, or they may require you to refinance the entire loan structure to remove the bridging component.

If your apartment remains unsold after twelve months, most lenders will not extend the bridging loan further. At that point, you either need to refinance both properties as investment loans, sell the new apartment, or find another way to repay the bridging component. Refinancing both properties as investments means you lose access to the principal place of residence capital gains tax exemption on your original apartment, and your borrowing capacity is assessed using rental income rather than your full salary.

The risk of holding two properties for an extended period is highest in markets where apartment stock is oversupplied or where buyer demand has softened. If you purchase in a precinct with high levels of new apartment construction, such as parts of Parramatta or South Brisbane, your existing apartment may take longer to sell than anticipated. Pricing your original property competitively from the outset reduces this risk, but it does not eliminate it.

When Bridging Finance Makes Sense for Apartment Buyers

Bridging loans work when your existing apartment has enough equity to cover the deposit and costs on your next property, and when you are confident your original apartment will sell within six to twelve months. This structure is most useful in markets where rental vacancy is tight and buyer demand for apartments remains stable, such as Adelaide CBD, North Adelaide, or Chermside.

For a midwife moving from a one-bedroom apartment in Footscray to a two-bedroom apartment closer to the new Footscray Hospital, bridging finance means she can secure the property she wants without waiting for her existing apartment to sell. Footscray's unit market recorded 334 annual sales, and vacancy rates across Melbourne remain below long-term averages, which means her existing apartment is likely to sell within a reasonable timeframe. She avoids the cost and disruption of renting temporarily, and she locks in the property before prices move further.

Bridging finance does not suit buyers who are uncertain about the sale timeline, who are purchasing in oversupplied markets, or who do not have sufficient equity to keep the combined LVR below a manageable level. If your existing apartment is in a building with known defects, high owner-occupier turnover, or limited buyer interest, the risk of an extended sale period makes bridging finance less suitable. In those situations, selling first or using a guarantor arrangement may be a lower-risk option.

Alternatives to Bridging Finance for Nurses and Midwives

If bridging finance does not suit your situation, you can structure the purchase using a longer settlement period, a deposit bond, or by selling your existing apartment before you exchange contracts on the new one. A longer settlement period gives you time to sell your original property without needing a bridging loan, but it requires the vendor to agree to a delayed settlement, which is not always possible in competitive markets.

A deposit bond is an insurance product that guarantees your deposit to the vendor without requiring you to pay cash upfront. You repay the bond provider once your existing apartment settles. Deposit bonds are more common in new apartment sales, where settlement may be twelve months or more away, and they are less common in established apartment transactions where vendors expect cleared funds at exchange.

Selling your existing apartment before you buy means you avoid bridging costs entirely, but it also means you may need to rent temporarily if you cannot align the sale and purchase settlements. Temporary rental gives you flexibility to find the right property without time pressure, but it adds moving costs and disrupts your living arrangements. For nurses and midwives working shift rosters, moving twice within a short period can be difficult to manage around work commitments.

Home loans for nurses are structured to recognise shift penalties, overtime, and allowances as part of your assessable income, which improves your borrowing capacity whether you use bridging finance or a standard loan structure. If you are buying your next home and your income includes regular shift loadings, working with a mortgage broker who understands nursing income means your application is assessed using the full value of your earnings, not just your base salary.

Call one of our team or book an appointment at a time that works for you. We structure bridging loans for nurses and midwives across Australia, and we work with lenders who offer LMI waivers and competitive rates for healthcare professionals.

Frequently Asked Questions