Do You Actually Need a Bridging Loan, or Is There a Cheaper Way?
Do you need a bridging loan, or is a deposit bond, a longer settlement or a same day settlement cheaper? What each costs, and where each one fails.
Property Lending Hub
Bridging Loan Alternatives · Deposit Bond · Settlement Period
The most common answer on the forums is not a lender's answer: do you need a bridging loan at all? Four alternatives, what each one costs, where each one fails, and who has to agree before it works.
Quick Answer
Often you do not. Before pricing a bridging loan, price the cheaper options first: a longer settlement period agreed with the seller, a same day settlement, or selling first and renting. A short term loan is what you use when none of them will hold.
Part of the bridging finance guide, alongside term sheet decoded.
Also called: bridging loan alternatives, deposit bond, simultaneous settlement.
Do you actually need a bridging loan?
Most of the time, no. The question that arrives is almost always which bridging lender to use, and in practice the better first question is whether the gap between the two settlements can be closed without borrowing against a second property at all. There are four ways to close it, and only one of them is a loan.
You can ask for a longer settlement period on the purchase. You can try to settle both properties on the same day. You can sell first and rent. Or you can use a deposit bond to cover the deposit at exchange. Every general explainer on this topic lists those four. Almost none of them costs them, and none of them tells you the thing that actually decides it, which is who has to say yes before each one works.
That is what this page does. It prices each option on the lines you can control, says where each one stops working, and names the counterparty who can end it. If you are buying before selling and want the mechanics of that position rather than the comparison, the guide to buying before selling when you are self employed covers it, and the rest of the lane sits on the property lending hub.
What does asking for a longer settlement period actually cost you?
Asking costs nothing, and if the seller agrees, a longer settlement period usually carries no fee at all. That makes it the cheapest option in this comparison by a wide margin, and it is the one most buyers skip because they assume the date is fixed.
It is not fixed, and the government guidance is unusually clear about who sets it. Consumer Affairs Victoria states that the seller sets the date of settlement in the contract of sale and that the settlement period is usually 30 to 90 days. Two things follow from that. The first is that a 90 day settlement is inside the ordinary range rather than an exotic request, so the widely repeated idea that 30 or 60 days is the standard understates the top of the published range by a month. The second is that because the seller sets it, the request is a negotiation, and a seller who needs the proceeds on a fixed day to fund their own purchase will refuse.
Where it does cost you is in what you trade for it. A vendor who agrees to wait longer is carrying the risk and often prices it, either in the price itself or in a larger deposit. A longer period agreed up front is also completely different from one that runs over, and the difference is expensive: a deferred settlement arrangement that is written into the contract is free, while missing an agreed date puts you into penalty interest on a late settlement at the contract rate. That cost is a separate topic and the guide covers it properly.
What goes wrong when you try to buy and sell on the same day?
A same day settlement works right up until one side of it is not ready, and then the cost lands on you rather than on the party that caused the delay. The mechanics of how a simultaneous settlement is actually booked, funded and sequenced belong on their own page and are not repeated here. What matters for this comparison is the failure cost.
The structure asks two unrelated transactions to complete within hours of each other. Your buyer has to be ready, their lender has to be ready, your own lender has to be ready, and two conveyancers have to align on the same day. Any one of them can slip for reasons that have nothing to do with you. When the sale slips, the purchase money is not there, and you are the party in default on the purchase even though the delay happened on the other contract.
The bill for that is in two parts. You pay penalty interest on the purchase, at the rate in that contract, for every day you are late. And if the delay runs on, the seller can serve a notice to complete, which puts your deposit and the contract itself at risk. In practice this is the option that looks free and is not, because its cost is a low probability of a very bad day rather than a fee you can see in advance.
Is selling first and renting cheaper than bridging?
On cash cost, usually yes. Selling first removes the borrowing entirely, and what replaces it is a set of smaller, more predictable costs: a second removalist bill, storage if the dates do not meet, a rental bond, and rent for however long the gap runs.
The comparison is not as close as it looks once you price the finance side honestly, and pricing it is harder than it should be. Of the four Australian bridging pages read for this article on 14 September 2026, only one publishes a set up fee at all. On the lender pages that do publish, the set up charge runs from approximately 0.6 per cent of the loan on a mainstream non bank bridge to roughly 1.5 to 2.5 per cent on a private one, with legal and valuation costs of approximately $1,500 to $4,500 and a discharge fee of around $500 to $1,500 on the private lane. Those are indicative bands read from lender pages on 14 September 2026, one of them dated 8 May 2026, and they sit on top of the interest.
| Cost line | Sell first and rent | Bridge and sell later | Who bears the timing risk |
|---|---|---|---|
| Loan set up or establishment charge | None, there is no new loan on the gap | Approximately 0.6 per cent of the loan on a mainstream non bank bridge, to roughly 1.5 to 2.5 per cent on a private one, read from lender pages on 14 September 2026 | You, once the loan is written |
| Interest while the two properties overlap | None, the properties never overlap | Charged for the whole term, typically capitalised rather than repaid monthly | You, and it grows with every week the sale takes |
| Valuation and legal costs | One valuation on the sale, if any | Approximately $1,500 to $4,500 on the private lane, two properties usually valued | You, payable whether or not the deal proceeds |
| Discharge or exit charge | Only on your existing loan | Around $500 to $1,500 on the private lane, indicative and varies by lender | You, at payout |
| Moving, storage and rent | Two moves, a rental bond, storage if the dates do not meet, and rent for the gap | One move, no rental bond | You, and the gap is open ended |
| Price movement while you are out of the market | Yours in full, you buy back at whatever the market has done | Largely removed, you have already bought | You on one side, the market on the other |
| Certainty of the home you end up in | None until you buy, and you may compromise under time pressure | Fixed at the start | You, in the form of a rushed purchase |
Fee bands are indicative, read from Australian lender pages on 14 September 2026, one of them dated 8 May 2026. They vary by lender, loan size and security and are not a quote.
So why does anyone bridge? Because the cost is not the reason people avoid selling first. The reason is that selling first hands you two risks at once: you have to find a rental in the same market you are about to buy back into, and you have to buy back in at whatever the market does while you are in it. A bridge converts both of those into a known interest cost over a known term. That is the trade, and it is worth doing deliberately rather than by default. Map the exit strategy first, then decide, and if you want the finance side tested against your actual numbers you can check eligibility before you list.
What does a deposit bond cost, and what does it not do?
No Australian regulator or industry body publishes what a deposit bond costs. That is not a gap in this article, it is a measured finding: the government and regulator pages read for this page on 14 September 2026 define the instrument and say nothing about its price. Every figure in circulation traces back to an issuer, a broker or a fee calculator, which means the number you are shown is a price rather than a benchmark. Treat it as a quote, get more than one, and read what the fee is charged on.
The more useful question is what a deposit bond does not do, because that is where people are caught out. It covers the deposit at exchange and nothing else, so the full purchase price is still due at settlement and your finance still has to be in place. It is a guarantee rather than a payment, so if you do not complete, the issuer pays the seller and then comes to you for the money. And it only exists if the other side accepts it: the New South Wales Government's own guidance for buying off the plan states that purchasers can use a bank guarantee or deposit bond in place of a cash deposit only if the developer agrees before the contract is signed.
What the official sources actually publish about deposit bonds
- ZeroAustralian regulator or government pages read for this article publish what a deposit bond costs. The qualifier: they define the instrument and stop there, so every fee figure in circulation comes from an issuer, a broker or a calculator built to sell one. Australian government and regulator pages on property settlement, buying off the plan and consumer money terms, read 14 September 2026.
- Oneparty can end a deposit bond before it starts, and it is not your lender. The qualifier: the condition is set at exchange, so it has to be raised before contracts are signed rather than after. New South Wales Government, buying property off the plan guidance, read 14 September 2026.
- Fullpurchase price is still due at settlement. The qualifier: a deposit bond defers the deposit only, so it changes nothing about the finance you need on the day and is not a substitute for a loan. Read from the instrument itself, against Australian government definitions, 14 September 2026.
General information only. Deposit bond pricing is set by the issuer and varies with the deposit, the term and the applicant, so get a written quote rather than working from a published percentage. Lender figures are published product terms read at source on the date shown, subject to change without notice and to credit assessment; they are not offers.
That last point is the one that reorders this whole comparison, and it is covered again in the table below. A deposit bond is usually presented as the option inside your own control. It is not. It is the option inside the seller's control, and you find that out at the worst possible moment, which is when you want to exchange. If your gap is the whole purchase rather than the deposit, this instrument is not an alternative to a short term loan in the first place.
Which option fits which situation?
Match the option to the party who can stop it, not to the headline cost. Ranked on price alone the order is obvious: ask for a longer settlement period, then a deposit bond, then selling first and renting, then a same day settlement, then a bridging loan. Ranked on whether you can actually make it happen, the order almost inverts.
Four of these five need somebody else to agree before they work, and only the loan does not. A seller can refuse a longer settlement period. A seller or developer can refuse a deposit bond. A same day settlement needs a buyer, two lenders and two conveyancers to line up. Selling first needs a landlord to accept you. A bridging loan needs a lender to say yes, which is a real condition but it is one you can test in advance and one you can test with more than one lender at a time.
| Option | How it works, in one line | What it costs | Where it fails | Who has to agree |
|---|---|---|---|---|
| A longer settlement period on the purchase | You agree a later date in the contract of sale so the sale has time to complete first | Usually no fee, sometimes a higher price or a larger deposit | When the seller needs the proceeds on a fixed day for their own purchase | The seller, who sets the date |
| Both properties settling on the same day | The sale funds the purchase within hours, on the same day | No fee, but penalty interest and a notice to complete if it slips | When any one of two buyers, two lenders and two conveyancers is not ready | Your buyer, both lenders and both conveyancers |
| Selling first and renting | You sell, bank the proceeds, rent, and buy with cash certainty | Two moves, storage, a rental bond and rent for the gap | When the rental market is tight, or prices move while you are out of it | A landlord, and the market |
| A deposit bond at exchange | A guarantee stands in for the cash deposit until settlement | A one off charge on the deposit, quoted by the issuer, not published by any regulator | When the gap you need covered is the purchase price rather than the deposit | The seller or developer, before contracts are signed |
| A bridging loan | A short term facility funds the purchase until the sale completes | A set up charge, interest for the term, valuation, legal and discharge costs | When the sale takes materially longer than the term allowed | A lender, and you can test more than one |
In practice that is why the cheapest option on paper is so often not the one that ships. If you have already tried the first four and the dates still will not meet, the position you are in is the one the buying before selling guide was written for, and you can check eligibility against your own numbers rather than against a calculator.
Four things can close the gap between a sale and a purchase, and a loan is only one of them. Ranked on cost the order is clear: ask for a longer settlement period first, then look at a deposit bond, then selling first and renting, then a same day settlement, and only then a bridging loan. Ranked on whether you can make it happen, the order almost inverts, because four of the five need somebody else to agree and only the loan does not. Where the gap is short and dated rather than open ended, the instrument people reach for instead of a bridge is set out on our caveat loans page.
Key takeaway: price the cheaper options first, but choose on who can say no, because the option inside your own control is rarely the cheapest one on paper.Frequently asked questions
A deposit bond is cheaper than a bridging loan in almost every case, because it is a one off charge on the deposit rather than interest on a loan the size of a house. It is also doing a much smaller job: it covers the deposit at exchange and nothing else, so you still need the full purchase price funded at settlement. Where the gap you are covering is the whole purchase and not just the deposit, a short term loan is the instrument that fits, and the two are not really alternatives at all.
There is no statutory settlement period in Australia, so the length is whatever the contract says. Consumer Affairs Victoria puts the usual range at 30 to 90 days and notes that the seller sets the date in the contract of sale, which is why a longer period is something you negotiate rather than something you are entitled to. A period agreed up front is different from one that runs late, and the cost of running late is covered in the guide to penalty interest on a late settlement.
Selling first is cheaper and buying first is safer, and which one is better depends entirely on which risk you can carry. Sell first and you know your number, but you may be renting and moving twice while you buy back into the same market. Buy first and you have certainty on the home, at the cost of funding two properties for a while, which is the position the buying before selling guide works through in detail.
You can ask the vendor for a longer settlement period at any point before contracts are exchanged, and it is the cheapest request in this whole comparison because it usually carries no fee. Whether you get it is a different question: the seller sets the date, and a seller who needs the money on a fixed day will say no. If the answer is no and the dates still do not meet, that is the point at which a short term loan or a deferred settlement arrangement starts to earn its cost.
If you sell first and cannot find somewhere to buy, you rent, and the real cost is not the rent but the second move and the risk of buying back into a market that has moved. In practice the people this hurts are the ones who sold into a rising market with no purchase lined up. It is worth mapping your exit strategy before you list rather than after, and you can check eligibility for a short term facility as a fallback while you are still deciding.
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