A bridging loan is a short-term mortgage that lets you buy a new property before you’ve sold your existing one. Instead of being forced to sell first and potentially rent in between, bridging finance lets you complete the purchase using your existing home’s equity — then repay the bridge once your old home sells. In New Zealand, bridging loans are offered by major banks and some specialist lenders, usually for terms of 6–12 months.
A bridging loan lets you buy a new NZ property before selling your existing one. Banks assess 'peak debt' (owning both properties simultaneously) and 'end debt' (after the sale proceeds are applied). If you can service the peak debt, all major NZ banks offer bridging finance for up to 12 months, usually at floating rates.
When You Need a Bridging Loan
Most homeowners moving from one property to another face a timing mismatch: the property they want to buy is available now, but their existing home hasn’t sold yet. Options without bridging finance:
- Sell first, then buy — eliminates timing risk but may require temporary accommodation between settlements
- Make the purchase conditional on the sale of your current property — reduces your attractiveness as a buyer (vendors prefer unconditional offers) and may not work at auction
- Bridging finance — allows you to buy unconditionally without waiting for your existing home to sell
Bridging is most common when:
- You’ve found the right property and don’t want to lose it while waiting to sell
- You’re buying at auction (which requires unconditional purchase)
- The settlement dates of purchase and sale can’t be aligned
How Bridging Finance Works in NZ
NZ bridging loans use two key terms: peak debt and end debt.
Peak debt = your total debt at the point when you own both properties:
- New property mortgage + remaining mortgage on old property
End debt = the mortgage remaining after your old property sells and the proceeds are applied:
- New property mortgage − (sale proceeds from old property − old property mortgage − selling costs)
Example:
| Amount | |
|---|---|
| New property purchase price | $850,000 |
| Deposit from savings | $50,000 |
| New property loan (purchase − deposit) | $800,000 |
| Existing home value | $700,000 |
| Existing home mortgage outstanding | $150,000 |
| Peak debt (owning both) | $950,000 |
| Sale proceeds from existing home | $700,000 |
| Less: existing mortgage repaid | ($150,000) |
| Less: selling costs (~2.5%) | ($17,500) |
| Net sale proceeds | $532,500 |
| End debt (new mortgage only) | $800,000 − $532,500 = $267,500 |
The bank assesses whether you can service the peak debt during the bridging period (typically up to 12 months). Serviceability at peak debt is the critical question — can you carry two mortgages simultaneously?
Interest During the Bridge Period
During the bridging period, you’ll be paying:
- Regular mortgage repayments on your existing home (as normal)
- Interest on the new property loan (principal + interest or interest-only depending on structure)
Some banks offer capitalised interest on the bridging component — meaning interest accrues and is added to the loan balance rather than requiring immediate payment. This reduces cashflow pressure during the bridge period but increases the total interest cost.
Ask your bank how they structure interest during the peak debt period — it significantly affects cashflow.
Bridging Loan Terms and Costs
| Feature | Typical structure |
|---|---|
| Maximum bridge period | 6–12 months (most banks) |
| Interest rate (bridging portion) | May be floating rate or short-term fixed |
| Fees | Application fee, establishment fee, possibly break fee at end |
| Repayment | Bridging loan repaid in full from sale proceeds |
Bridging rates are often at or above the standard floating rate. Because the bridge is a short-term facility, the interest cost over 3–6 months is manageable — but the total cost depends heavily on how quickly your existing property sells.
Risks to Understand
Your old property doesn’t sell quickly If the market softens or your property takes longer to sell than expected, you carry the full peak debt for longer. Banks typically cap bridging finance at 12 months — if your property hasn’t sold by then, you’ll need to renegotiate or potentially sell under pressure.
Your old property sells for less than expected If the sale proceeds are lower than forecast, your end debt will be higher. Lenders will model a range of sale scenarios — you should too. Stress test: what is your end debt if you sell for 10%–15% below your expected price?
Serviceability at peak debt Some borrowers can service the end debt comfortably but cannot service peak debt (two mortgages simultaneously). If you can’t demonstrate serviceability at peak, bridging finance won’t be approved.
Simultaneous Settlement as an Alternative
If you can align the settlement date of your sale with the settlement of your purchase, you may not need bridging finance at all. Your lawyer can sometimes negotiate simultaneous settlement — where the proceeds of your sale are used directly to fund your purchase on the same day.
Simultaneous settlement eliminates the bridging period but requires tight coordination between both transactions, both sets of lawyers, and both lenders. It’s not always possible, but worth exploring.
Which Banks Offer Bridging Finance in NZ?
All major NZ banks (ANZ, ASB, BNZ, Westpac, Kiwibank) offer bridging finance, though policies differ on:
- Maximum bridge period
- Whether they capitalise interest
- How they assess serviceability at peak debt
A mortgage broker can identify which bank’s bridging policy best fits your specific situation. See Using a Mortgage Broker NZ.
Frequently Asked Questions
What is a bridging loan in New Zealand?
A bridging loan is short-term finance used to buy a new property before your existing property has sold. It bridges the gap between the two transactions. The loan is typically repaid in full from the proceeds of your old property sale and is designed for bridge periods of up to 12 months.
What is peak debt in a bridging loan?
Peak debt is your total mortgage debt when you own both properties simultaneously: the new property loan plus the outstanding balance on your old property. Banks assess whether your income can service this peak figure during the bridging period before approving the finance.
How long can you have a bridging loan in NZ?
Most NZ banks offer bridging loans for up to 12 months. The expectation is your existing property sells within this period. If it hasn’t by the expiry date, you’ll need to renegotiate terms or potentially sell under pricing pressure.
Which banks offer bridging finance in NZ?
All major NZ banks — ANZ, ASB, BNZ, Westpac, and Kiwibank — offer bridging finance for residential property purchases. Policies differ on maximum bridge period, how interest is handled during peak debt, and serviceability assessment approach. A mortgage broker can compare structures across lenders.
What happens if my house doesn’t sell during a bridging loan in NZ?
If your property hasn’t sold by the bridge period end date, you’ll need to negotiate an extension (not guaranteed) or accept whatever price the market offers. This is the primary risk of bridging finance — ensure you have a realistic view of your property’s saleability and the likely timeframe before proceeding.