As the name suggests, a bridging loan ‘bridges the gap’ between two home loans.
The lender you choose takes security over both properties and lends against these properties until the sale and purchase process on both is completed. During a bridging loan period, your home loan will generally be charged as an interest-only loan. Many lenders offer interest rates comparable to the standard variable rate, or only slightly above.
Bridging home loans are a good way to buy a new property before the sale of your existing home. They are commonly used to finance the purchase of a new property while your current property is being sold, but also provide finance to build a new home while you live in your current home.