Buy before you sell: bridging loan vs two-stage structure
Buying before you sell is a servicing problem disguised as a timing problem. For a period you own two properties and owe on both, and every lender has a different view of whether that is your problem or theirs.
There are three routes, and they are not variations on one product.
Route 1: a traditional bridging loan
The classic structure. Typically requires an unconditional sale of the outgoing property, dual serviceability during the bridge, and often existing-customer status with the lender.
The constraint people underestimate: full-doc bridging limits are usually sized off post-sale ongoing income only, not the combined position during the bridge. So the assessment is not “can you carry both for four months” — it is “what can you afford once the dust settles,” which is a much smaller number.
The shading problem
Without a signed contract of sale on the outgoing property, bridging lenders shade its value — discounting the expected sale price and requiring the borrower to fund the difference in cash at settlement.
On one file that shading required roughly $62,250 up front including about $16,500 of agent commission, reducing to $45,750 if commission funds were held separately. Once a contract was signed at $1,150,000, the lender stopped shading and lent against the full expected price — and the additional cash contribution went to zero.
Getting the outgoing property under contract early is the single highest-value action in any buy-before-sell scenario. It is worth more than shopping the rate.
Route 2: your own bank’s relocation product
Many major lenders run a dedicated relocation or bridging product for existing customers. The features that matter: often no repayments during the bridge, interest capitalised, and a longer runway to sell — typically six to twelve months rather than a hard short window.
If you are already a customer of the bank holding the existing loan, this route usually costs least and creates the least friction. It is also the route most often overlooked, because it is not what a broker gets asked about.
Route 3: a two-stage non-bank structure
This is the route that works when the first two do not, and it is a sequence rather than a product.
- Refinance the existing property to a non-bank lender and release equity, using that equity to fund the new purchase. The existing home is not under time pressure to sell, because the money has already been released.
- Once the old property sells, pay out the investment loan and refinance the remaining home loan back to a mainstream lender at mainstream pricing.
The point of stage two is that the non-bank pricing is temporary by design. You are buying time, not a long-term facility.
Why the ceiling is so much higher
Because low-doc and alt-doc servicing is assessed on declared income rather than a post-sale full-doc calculation, the borrowing ceiling can be dramatically different for the same borrower. One worked comparison: roughly $1.75m on a low-doc assessment against $757,000 full-doc — the same person, the same assets, a different assessment method.
That gap is the whole reason the two-stage structure exists. It is also why it demands care: a higher declared income is a representation you must be able to stand behind, and the facility should be genuinely temporary.
Choosing between them
Three questions decide it:
- Are you an existing customer of the bank on the current loan? If yes, price their relocation product first.
- How confident is the sale timeline? If a contract is signed or imminent, traditional bridging works and shading disappears. If the property has not been listed, the two-stage structure removes the pressure.
- How does your income present? If full-doc post-sale servicing supports the number you need, take the cheapest route. If it does not, the two-stage structure is the only one that reaches.
Compare all-up dollar cost, not rate
A worked decision between an already conditionally-approved alt-doc loan and a newer low-doc bridging product:
- Alt-doc loan: 90% LVR, $1,039,500, 7.94% rate plus a 1.0% risk fee, roughly $9,000 borrower contribution at settlement — and already conditionally approved.
- Bridging product: 0.60% establishment fee, about $10,950 on $1,825,000 of total funding, at a slightly higher interest rate.
Translating both into plain all-up dollar cost — fees plus required contribution — rather than comparing headline rates made the decision obvious. The alt-doc loan was already approved and could settle sooner, so it became the primary path, with the bridging loan applied for only as a backup.
Two things that decided it beyond the numbers: an existing approval is worth real money when settlement dates are fixed, and a lender new to market with no track record is a poor choice for the primary path on a transaction that cannot fail.
One structuring note
If the bridge and the exit refinance are close together in time, order one valuation scoped for both purposes and tell the valuer explicitly. It saves a second fee and, more importantly, a second turnaround.
General information only. It is not credit assistance, financial product advice, or an offer of finance, and it does not take account of your objectives, financial situation or needs. Figures are de-identified observations over 2024–2026.