Bridging Finance: What Kiwi Homeowners Need to Know
Thinking about buying your next home before you’ve sold your current one? You’re not alone, and bridging finance could be the key that unlocks your next move.
Moving house is often stressful, especially if you already own a home and need to sell it while buying another. Matching settlement dates can be tricky, and you might end up without a place to stay or paying two mortgages at once.
With New Zealand’s fast-moving property market, bridging finance is becoming a popular choice for homeowners. Searches for bridging loans jumped over 40% in the first quarter of 2025, showing more buyers want to secure their next home without missing out.
Here’s what bridging finance is, how it works, why people use it, and what to consider before deciding.
What Is Bridging Finance?
A bridging loan is a temporary loan that covers the gap between buying your new home and settling on your old one. It’s a short-term, floating home loan that lets you buy a new home before selling your current one. You repay the balance once your existing home is sold.
Simply put, bridging finance lets you:
- Pay for your new home,
- even if your old home hasn’t sold yet,
- and settle the bridging loan once your sale completes.
It helps you move when you’re ready, instead of waiting for the market.
How Does Bridging Finance Work?
Bridging finance gives you a short-term loan secured by your current property, and sometimes the new one as well. When your home sells, you use the money from the sale to pay off the loan.
Most bridging loans are interest-only, so you pay just the interest while the loan is active. This helps keep your payments manageable until settlement.
There are two main types of bridging loans…
Open Bridging Finance
This type is best if you want to buy a new home before your current home is unconditional. You can sometimes use it for a deposit on your new home before selling your current one.
Banks see this type of bridging finance as higher risk because there’s no guarantee you’ll sell your home quickly, or even at all. You usually need a lot of equity, and lenders are more cautious about approving these loans.
Closed Bridging Finance
This type is for when you need to settle on your new home before your old one is sold, so you pay two mortgages for a short time. It’s called a closed term because it has a set term, which can be as short as a day or as long as six months.
Since closed bridging finance has a set end date, banks see it as lower risk and are more likely to approve it. You’ll still need to show you can afford both mortgage payments for the loan period.
Why Get Bridging Finance?
1. You Won’t Lose the Home You Want
In a competitive market, waiting to sell before buying can mean losing out on your dream property.
2. Skip the Stress of Temporary Accommodation
Instead of moving twice, selling, renting, then buying, you stay put until everything’s sorted.
3. Better Timing = Better Price
You can take your time selling your home, which might help you get a better price.
4. Act Fast
If a great opportunity comes up, bridging finance lets you act quickly, even if your money is still tied up in your current home.
How Much Does a Bridging Loan Cost?
Bridging loans are typically more expensive than standard home loans, reflecting…
- Higher interest rates,
- Short-term risk for lenders, and
- Set-up or establishment fees.
Because interest is usually charged at a floating rate, the exact cost varies based on…
- How long is the loan needed?
- How much you borrow, and
- How quickly your home sells.
That’s why careful planning and expert advice are essential.
Things to Consider Before Taking on Bridging Finance
Before you jump in, ask yourself…
1. Can you afford two loans at once?
You’ll likely be servicing your current mortgage plus the interest on your bridging loan until your home sells. That can be a serious cash flow moment.
2. What if your house takes longer to sell than expected?
Market conditions can shift fast, and slower sales mean longer loan terms and higher costs.
3. Do you have a backup plan if your home sells for less than expected?
It’s realistic to have a plan B, savings, a deposit, or alternative financing just in case.
A good mortgage adviser will walk you through these scenarios and help tailor a solution to your unique situation.
FAQs: Bridging Finance Made Easy
1. What exactly is bridging finance?
It’s a short-term loan that helps you buy a new property before you’ve sold your current one.
2. How does bridging finance work?
You borrow against your existing property, pay interest while waiting for your sale, and then use the sale proceeds to repay the loan.
3. Why get bridging finance?
To avoid losing out on your next home, skip temporary living and align your buying and selling timing.
4. How much does a bridging loan cost?
Costs vary; bridging loans usually have higher interest rates and fees than regular mortgages, and the total cost depends on the loan term.
5. What are the common types of bridging loans?
There are closed bridges (with a fixed repayment date) and open bridges (with no set sale date yet).
Need Help With Bridging Finance? Talk to Rapson
Bridging finance isn’t one-size-fits-all, and navigating your situation with confidence means getting expert guidance.
At Rapson, we specialise in helping Kiwis make smarter, smoother property moves.
Whether you’re upgrading, downsizing, or chasing your dream home, our team will help you…
- Weigh your options,
- Crunch the numbers, and
- Choose the right solution for your goals.
Ready to explore bridging finance?
Contact Rapson today. We’re here to break it down, make it clear, and help you step forward with confidence.