Commercial bridging loans and how the costs work

What is a commercial bridging loan?

A commercial bridging loan is a short-term loan that “bridges” two events. The most common is buying a commercial property before the existing one has sold. The new purchase settles, the old property sells later, and the sale proceeds repay the bridge. Other versions bridge to a refinance, an approval, a lease-up or the release of funds from an estate or a sale of shares.

Bridging is different from a standard commercial mortgage. A standard mortgage is built to be held. A bridge is built to be repaid, so the lender focuses heavily on the security and on how the loan ends.

How do bridging costs work?

Cost is the part borrowers ask about most, and the honest answer is that it is built from several components rather than one headline number. Every loan is priced on the borrower’s circumstances, so we do not publish figures. What we can do is show you what makes up the total so that nothing surprises you later.

Cost component	What it is	What moves it
Interest	Charge for using the money over the time held	Loan size, security quality, time held, lender
Lender or establishment fee	A fee for setting up the loan	Complexity and lender policy
Valuation and assessment	Cost of the lender’s property assessment	Property type, location, urgency
Legal and settlement costs	Solicitor, conveyancing and registration costs	Number of properties, entities and complexity
Extension or exit fees	Charges if the term runs on or the loan ends in a particular way	Lender terms and how the exit unfolds
Duty and GST	Not lender charges, but real costs of the purchase	State rules and how the sale is structured

Time held is the biggest lever. A bridge that runs on for longer than planned costs more than one repaid on schedule. That is why we always talk about the exit before we talk about the loan.

How does interest get handled?

There are generally three approaches, and the lender decides which are available:

• Serviced monthly: you pay interest as you go, which keeps the debt from growing but takes cash.
• Prepaid: interest for an agreed period is paid upfront, often from the loan itself.
• Capitalised: interest is added to the loan balance and repaid at the end.

Each approach shifts the cash flow differently. Capitalising can feel easier during the term, but it raises the balance you must repay at the exit. If you want to experiment with different loan sizes and terms, use our loan calculator to see how the numbers behave, then talk to us about how a lender would actually structure it.

Who do commercial bridging loans suit?

• Business owners buying new premises before selling the old.
• Investors between sales and purchases.
• Developers holding a site while approvals or presales are finalised.
• Owners facing a lender deadline who need to refinance quickly.
• Buyers settling ahead of an inheritance, a trust distribution or a sale of another asset.

They are less suitable for people with no certain way to repay, or where the property would be hard to sell in a reasonable time.

What do lenders look at?

The security is the starting point: its type, location, saleability and value. Lenders also look at the exit plan with real scepticism. A signed sale contract is strong evidence. A hope that the market will pick up is not. They then consider the borrower’s experience and conduct, the existing debts against the property, and the realism of the timeline.

How does Ownright approach bridging?

Ownright Custom Finance exists to find solutions when the usual path closes. Trevor Scott has spent more than 40 years in finance and his team arranges bridging across Australia, including for properties and borrowers that mainstream lenders avoid. We start by stress-testing the exit, because a bridge with a weak exit costs everyone. We then match the deal to lenders who understand the asset class and are comfortable with the timeline.

We also help you plan for the “what if”. What if the sale slips? What if the valuation comes in lower than hoped? What if the buyer’s finance falls over? Knowing the answers before you sign makes the loan safer. If you have a purchase or deadline coming up, send us the details.

An illustrative example

Illustrative only, no real client. An owner of a small industrial unit finds a larger unit that suits the growing business. The existing unit is on the market, and the vendor of the new one wants a quick settlement. A bridging loan secured by both properties covers the purchase. When the old unit sells, the proceeds repay the bridge. The cost depends on how long the old unit takes to sell, which is why the lender and borrower agree on a realistic term, and why a buffer matters.

Mistakes to avoid

• Underestimating how long a sale will take.
• Comparing bridging offers on one number rather than the whole structure.
• Forgetting duty, GST and legal costs in the funding plan.
• Not clarifying extension terms in advance.
• Relying on a single buyer whose own finance is uncertain.

Documents to have ready

• Contract for the purchase and details of the sale property
• Evidence of the exit such as a sale contract or listing agreement
• Details of current loans over each property
• Identification, entity documents and financial information
• Any appraisal from a local agent, which helps with expectations

Which costs do borrowers most often miss?

The interest and lender fee are what people notice. The costs that catch borrowers out are usually the ones around the edges. Duty on the new purchase is payable at settlement and can be substantial, and the amount depends on your state or territory revenue office. GST may apply to the sale or purchase, and whether it does depends on how the contract is structured. Legal costs can double when two properties are involved, and a second valuation may be required if the lender wants to assess both. Finally, selling costs on the old property, such as agent commission and marketing, come out of the proceeds that will repay the bridge.

We suggest drawing the whole timeline on one page: money out, money in and the date each happens. If the sums only work when everything goes perfectly, the plan needs more buffer.

How do I compare bridging offers properly?

Comparing on a single figure is a trap. Two offers can look alike on the surface and differ greatly once you account for the term, the way interest is handled, the fees at the start and the end, and what happens if you need an extension. A better approach is to run each offer through the same scenario: the sale happens on time, the sale is a few months late and the sale falls through and you refinance instead. The offer that holds up across all three is usually the stronger choice. Our loan calculator can help you test how different loan sizes and terms play out, and we can walk you through the structure for your particular deal.

What if the lender wants more security than the property I am buying?

It is common for bridging lenders to take security over both the old and the new property, because the old property is where repayment is coming from. Some also ask for additional security if the equity is thin. Cross-security means the properties are linked, which can complicate things if you want to sell one without the other. We explain how it would work before you agree, and where possible we structure it so each property can be released cleanly when its time comes.

Next steps

Understanding the structure is half the battle. If you would like us to map out how a bridge would work for your deal, talk to us about your situation. You can also read our guide to bridging loan exit strategies and see how this connects with short-term commercial loans and the wider bridging finance options.