Buyers, sellers, investors and owner-occupiers are flocking to bridging finance’s unique benefits
More than ever, brokers are using bridging finance to holistically service their clients’ needs, with the full gamut of buyers, sellers, investors and owner-occupiers using the short-term financing option in their homebuying and equity release strategies.
As one of the few bridging finance specialists in Australia, Bridgit is on top of the trends of this rapidly growing sub-segment of mortgage finance.
“We've seen extremely strong growth in the investor segment,” said Bridgit’s chief commercial officer Stephen Doyle (pictured), in a discussion with MPA. “We're seeing that segment increasingly using bridging as a strategy to access equity and grow their portfolios.”
Renovators have emerged as a distinct sub-group of the investor space, using bridging to fund upgrades on incoming or outgoing properties.
Doyle explained how land and house packages need longer terms to cover settlement timelines.
The traditional segments like downsizers, retirees, and upsizers, meanwhile, “are really coming to the forefront, and then there's regional and high-end property buyers making use of bridging due to longer sales cycles”.
To accommodate longer sales cycles, Bridgit recently introduced 24-month bridging loans.
“We've really looked at this for the last four years,” said Doyle. “When you really focus on it, you can see trends and opportunities for buyers and solutions. This is much more about solutions than anything.”
Buyer/seller nuances
Bridging finance can offer flexibility for both buyers and sellers, yet the strategic motivations behind each differ.
In a seller’s market, “homeowners want to secure their next home quickly”, said Doyle. Conversely, in a buyer’s market, sellers are under less pressure to sell fast, allowing them to “take time to sell without compromising the price”.
Bridging loans empower both ends – by removing the timing pressure from the transaction.
Recent market conditions are further enhancing bridging appeal. “Interest rates are favourable. The RBA cut to 3.6% in August… property prices are rising… and auction clearance rates are climbing,” said Doyle.
This environment encourages opportunistic purchases without the need to rush the sale of an existing property.
How a typical bridging loan works
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Step 1: Borrower finds a new property before selling the current one
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Step 2: Bridging lender provides full funds to purchase new property
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Step 3: Lender takes first charge over both old and new properties
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Step 4: Loan term is between six and 24 months
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Step 5: Interest is capitalised, so no monthly repayments required
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Step 6: Borrower sells their original property
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Step 7: Sale proceeds repay the bridging loan
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Step 8: Remaining loan (if any) is refinanced into a standard 30-year mortgage
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Broker Note: At Bridgit, brokers are paid commission on peak debt with ability to earn trail on longer terms
The primary risk in this timeline is the potential for property values to fluctuate during the loan term, limiting a viable exit strategy for the loan. But given the strength of the Australian market and short term nature of the term this is not a common scenario.
But the flexibility afforded by bridging loans has nonetheless spurred a lot of activity in the market – meaning opportunities for brokers are there.
Mining your books
“Brokers who have been around for a longer period of time have large books,” Doyle said. “I would always suggest they mine their database and look at the clients that may be able to utilise bridging to their advantage."
Clients facing life transitions – retirement, divorce, upsizing, or downsizing – are often ideal candidates.
Doyle encourages brokers to take a proactive approach: “Explain and educate to clients that bridging is an option for the next stage in their life.”
By positioning bridging as a strategic tool, brokers can offer tailored solutions that match their clients’ evolving needs.
Referral partnerships are another strong channel for sourcing bridging opportunities.
“Many brokers work with real estate agents,” Doyle pointed out. But rather than leading with rate talk, brokers should present bridging as a sales enabler. “If you can walk in as a broker and say, ‘I can help you facilitate the sale of two properties rather than one’, then they would be very interested.”
Bridging, Doyle noted, is part and parcel what brokers are already doing.
“It's residential lending – you already know how to service it, you already know how the property works because you do it every single day. This is just an extension to your bread and butter.”
