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    Bridging Finance Terminology

    Bridging Loan Glossary

    A comprehensive reference of bridging loan terms, property finance concepts, and cost-related terminology. Understanding these concepts helps you navigate bridging finance with confidence.

    10 Core Terms
    6 Property Terms
    6 Cost Terms

    Core Bridging Loan Terms

    Essential terminology you'll encounter when applying for bridging finance.

    Bridging Finance Fundamentals

    Bridging Loan
    A short-term loan used to 'bridge' the gap between buying a new property and selling an existing one, or to provide quick finance when traditional lenders can't meet tight timelines.
    Related: Short-term Finance, Settlement Gap, Caveat Loan
    LVR (Loan-to-Value Ratio)
    The loan amount expressed as a percentage of the property's value. Bridging loans typically offer LVRs from 65% to 80% depending on the property type and borrower situation.
    Related: Security, Property Value, First Mortgage
    Capitalised Interest
    Interest that is added to the loan balance rather than paid monthly. Common in bridging loans where the borrower repays everything (principal + interest) at the end of the loan term.
    Related: Interest Rate, Total Cost, Exit Strategy
    Exit Strategy
    The planned method for repaying the bridging loan. Typically through sale of existing property, refinance to a traditional mortgage, or settlement of a property purchase.
    Related: Refinance, Settlement, Loan Term
    Establishment Fee
    A one-time fee charged by the lender when setting up the loan. Usually 1-3% of the loan amount, covering valuations, legal costs, and administration.
    Related: Application Fee, Valuation Fee, Legal Costs
    Caveat Loan
    A type of bridging finance where the lender places a caveat (legal notice) on the property title instead of a registered mortgage. Faster to arrange but typically higher rates.
    Related: Second Mortgage, Unregistered Security, Fast Finance
    First Mortgage
    A loan secured by the property where the lender has first priority if the property is sold. First mortgage bridging loans typically have lower rates than second mortgages.
    Related: Security, Priority, Registered Mortgage
    Second Mortgage
    A loan secured against a property that already has an existing first mortgage. Higher risk for the lender means higher interest rates for the borrower.
    Related: First Mortgage, Equity, Subordinate Debt
    Settlement Gap
    The period between when you need to settle on a new property purchase and when you receive funds from selling your existing property. Bridging loans cover this gap.
    Related: Bridging Loan, Simultaneous Settlement, Property Chain
    Residual Debt
    The amount still owing on a property after it's sold and settlement costs are paid. Important for calculating how much bridging finance you actually need.
    Related: Net Proceeds, Equity, Settlement Statement

    Property & Auction Terms

    Terminology related to property purchases, auctions, and real estate transactions.

    Property Finance Terms

    Auction Finance
    Pre-approved funding specifically for property auctions where you need certainty of funds on auction day. Bridging lenders can provide approval within 24-48 hours.
    Related: Unconditional Approval, Deposit Bond, Settlement Period
    Deposit Bond
    A guarantee from an insurer that replaces the need for a cash deposit at auction or exchange. Useful when your funds are tied up in your existing property.
    Related: Auction Finance, Cash Deposit, Exchange of Contracts
    Unconditional Approval
    Loan approval with no outstanding conditions. Required for auction purchases where contracts are immediately binding with no cooling-off period.
    Related: Pre-approval, Conditional Approval, Finance Clause
    Equity Release
    Accessing the value (equity) in a property you own through a loan. Commonly used to fund deposits, renovations, or business opportunities.
    Related: LVR, Refinance, Home Equity
    Peak Debt
    The maximum total debt during a bridging period - typically when you own two properties before selling the first. Lenders assess your ability to service peak debt.
    Related: Serviceability, Dual Property Ownership, Debt Servicing
    Simultaneous Settlement
    When the sale of one property and purchase of another settle on the same day, eliminating the need for bridging finance. Difficult to coordinate in practice.
    Related: Settlement Gap, Property Chain, Conveyancing

    Costs & Fees

    Understanding the various costs, rates, and fees associated with bridging loans.

    Loan Costs & Fees

    Monthly Interest Rate
    The interest rate charged per month on a bridging loan, typically ranging from 0.8% to 1.5%. Multiply by 12 for an approximate annual comparison rate.
    Related: Capitalised Interest, Annual Rate, Comparison Rate
    Comparison Rate
    A rate that includes both the interest rate and most fees, designed to help compare different loan products. Required by law to be displayed alongside advertised rates.
    Related: Annual Percentage Rate, True Cost, Hidden Fees
    Valuation Fee
    The cost of having a property professionally valued to determine its market worth. Required by lenders to confirm the security value before approving a loan.
    Related: Establishment Fee, Security Value, LVR
    Exit Fee
    A fee charged when you repay and close the loan. Some lenders charge early exit fees if you repay before the minimum term. Look for lenders with no exit fees.
    Related: Early Repayment, Discharge Fee, Break Costs
    Line Fee
    An ongoing fee charged for having a facility available, even if not fully drawn. More common in business and development finance than residential bridging.
    Related: Facility Fee, Commitment Fee, Unused Limit Fee
    Default Interest
    A higher interest rate that applies if loan repayments are missed or the loan isn't repaid by the agreed end date. Can significantly increase total costs.
    Related: Penalty Rate, Late Payment, Loan Extension
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