Buying before selling: plan the funding gap
Buying before selling requires a plan for the new deposit, settlement funds and the period when you still own the existing home. A bridging loan may be an option, subject to lender approval and product terms. Work out both the highest debt during the overlap and the debt left after the sale. Then test a lower sale price and a longer selling period before relying on expected proceeds.
By Ratey · General information for Australian borrowers.
Worked example: a lower sale changes the debt left behind
Assume an existing mortgage of $400,000, a new purchase of $900,000 and $50,000 of purchase costs. If all are funded and no cash is contributed, simplified peak debt is $1,350,000. This excludes interest during the overlap and assumes no other debts or costs.
If the old home sells for $800,000 and selling costs are $25,000, the net proceeds available to reduce that combined debt are $775,000. Remaining debt would be $575,000. The old $400,000 mortgage is already included in peak debt, so it is not subtracted a second time.
If the sale is instead $750,000 with the same selling costs, net proceeds become $725,000 and remaining debt becomes $625,000. Any capitalised interest or additional financed costs would increase it further. This arithmetic is a planning illustration, not a bridging-loan quote.
Draw the dates before adding the dollars
List the new purchase deposit, new settlement, expected old-home sale and old settlement. The deposit may be due well before the sale proceeds arrive. Equity in the current property is not automatically cash available for that first payment.
For every date, write the amount needed and its confirmed source. Include purchase costs, selling costs and moving expenses. Ask your conveyancer or solicitor to explain the actual contract dates and obligations; use a lender’s written funding plan for the finance amounts.
If dates are still flexible, compare buying first with selling first or coordinating settlements. The aim is to understand the cost and practicality of each sequence, including temporary accommodation and storage where relevant.
Calculate peak debt and debt after the sale
Peak debt is the amount owed while both properties are being funded. The balance after the sale depends on the net proceeds actually applied to those loans. Keep gross sale price separate from the amount left after selling costs and any required debt payout.
Build the calculation in one place so the old mortgage is not deducted twice. If peak debt already includes the old loan, subtract net sale proceeds before repayment of that included loan. Alternatively, model each loan separately and show exactly where the proceeds go.
Your funding proposal may have more than one loan or security property. Ask the lender to show the balances at purchase settlement and after the sale using its actual structure, including interest added to debt if that is part of the offer.
Understand the particular bridging offer
CommBank describes bridging finance as a way to buy before receiving proceeds from the old property, with the sale proceeds used to repay the bridging loan. Its published product has a maximum 12-month term. This is a specific product example; another lender’s period and conditions may differ.
Ask how interest is paid during the overlap, what repayments are required, which properties secure the debt and what happens if the sale has not settled by the deadline. Confirm eligibility and total costs using the proposed lender’s documents.
Test a slower sale and a lower price together
A delay and a reduced sale price can happen in the same scenario. Add the extra holding costs, then recalculate the remaining debt with the lower proceeds. Include rates, insurance and other property costs alongside interest.
Choose a decision point before the money becomes tight: for example, when to review the asking price or adjust the purchase plan. A buffer is useful only if it remains available during the overlap. Money already committed to settlement cannot also fund the entire contingency.
Ratey’s equity calculator can help with a starting property snapshot. It does not model a lender’s bridging facility, confirm deposit access or approve finance. Keep the funding decision with the lender and the contract-timing discussion with your conveyancer.
Your next-step checklist
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Common questions
Does enough equity guarantee bridging finance?
No. Eligibility also depends on the lender’s assessment, property security and the proposed funding structure.
Can the purchase deposit come from the future sale?
Only if the timing and funding arrangements make those funds available when required. Expected sale proceeds are not automatically accessible before settlement.
Does Ratey calculate bridging repayments?
The public equity and refinance tools are not bridging-loan calculators. Use the lender’s quote for the overlap structure, interest treatment and required repayments.
Sources and assumptions
These primary sources support the explanations above. Examples use invented figures to show the calculation or decision; they are not available loan offers. Check your lender’s terms for your circumstances.
Calculations are estimates and do not establish borrowing eligibility. Read the calculation methodology.
Check your starting equity
Use current property and loan figures to prepare for the funding conversation.