A bridging loan for a property developer is short-term, property-secured finance that covers a timing gap: the weeks or months between settling a site and drawing construction finance, or between practical completion and selling down the last of the stock. It is not the homeowner “buy before you sell” product that fills the first page of Google, even though they share a name. For a developer, a bridge is a tool for holding or acquiring an asset while you arrange the funding that will actually carry the project, and it is priced and structured for that job.
This guide is written for the developer weighing a bridge on a live deal, and it stays on the numbers that decide whether the bridge is worth it: what it costs all in, how much you can borrow against the security, how lenders scrutinise your exit, whether the loan is regulated, who writes this finance, and how the holding cost lands in your feasibility and your margin. Almost every page ranking for “bridging loan” answers a different question for a different reader (someone moving house), so the developer-specific detail is thin online. The figures below are current as at July 2026 and are hedged on purpose, because bridging pricing moves with the cash rate, the lender, the security and your profile.
What is a bridging loan for a property developer?
For a developer, a bridging loan is short-term finance, usually 1 to 12 months (occasionally out to 18), secured against real property and repaid from a defined exit rather than from project income. The exit is the point. A bridge is designed to be taken out by something specific: a construction facility drawing down, a site settling, stock selling, or a longer-term loan refinancing it. Interest is generally capitalised (added to the loan balance) rather than paid monthly in cash, because a development site does not produce income while you hold it.
That structure is what separates developer bridging from the residential version. The major banks describe their products as short-term loans that help you “buy a new property before you’ve sold your existing one”, which is exactly how Commonwealth Bank’s bridging loan and Westpac’s bridging loan are framed. Useful if you are moving house. It tells a developer very little about settling a $4,000,000 site whose Development Application (DA) is still with council.
How is developer bridging different from a homeowner bridging loan?
The homeowner bridge is a regulated home loan sized off two residential valuations, priced close to a standard variable mortgage, run on interest-only terms for up to 12 months, and repaid when the family home sells. ANZ sets its bridging period at up to 12 months, smaller lenders such as P&N Bank write six to 12 month bridges, and the Commonwealth Bank bridging loan fact sheet describes the same capitalised, short-term structure. The developer bridge is a commercial facility, usually written by a non-bank or private lender, sized off the site’s value or the project’s Gross Realisation Value (GRV), priced several points higher, and repaid from a construction drawdown, a residual stock refinance or a sale. It also tends to settle far faster, in days rather than weeks, which is often the entire reason a developer reaches for it. Speed to settlement can be the difference between securing a site and losing it to another buyer, and that speed is what you are paying for.
The practical takeaway is to ignore the headline rates on the bank comparison pages when you are pricing a development bridge. They describe a different product with a different risk profile.
When does bridging finance actually help a developer?
Bridging finance helps a developer whenever value is real but locked, and a hard deadline is bearing down before the funding that should carry the project is available. In development that situation shows up in four recurring ways, each of them a timing gap rather than a shortfall of underlying value.
Securing or settling a site before construction finance is ready
The most common developer use is settling a site purchase when the construction facility is not yet approved or ready to draw. You have exchanged on a site, the settlement date is fixed, but your senior construction loan depends on a Development Application (DA) that has not been granted or presales that have not been reached. A bridge secured against the land lets you settle on time and hold the site while the Development Application (DA) and the construction facility are finalised, then it is repaid when the senior facility draws down. This also covers the developer who buys a site at auction or off-market and needs to complete quickly, before a full development funding package could realistically be assembled.
For site control specifically, a bridge is not the only route. A put and call option can hold a site without settling it at all, and is often cheaper than bridging where the vendor will agree to one. Bridging tends to win where the vendor wants a clean, fast settlement rather than a long option.
Refinancing residual (unsold) stock after completion
A residual stock loan is a bridge over the tail of a project, and it is one of the most valuable uses for a developer. When a project reaches practical completion, the construction facility usually has to be repaid in full, but the last apartments or townhouses may take another 6 to 18 months to sell. A residual stock loan refinances the completed, unsold stock, repays the construction lender, and lets you hold the remaining dwellings while they sell at proper prices rather than dumping them to hit a deadline. It also releases the equity trapped in that finished stock so you can put a deposit on the next site instead of waiting for the final settlement.
Releasing equity to move on the next site
Bridging can free the equity you have already created in one project to fund the deposit or the acquisition on the next. If a project is finished or nearly finished and carrying substantial equity, a short-term facility against that asset can turn paper profit into deployable cash months earlier than a full sell-down would. Most developers find this is where bridging earns its cost: not in the interest saved, but in the deals it lets you start sooner. The trade-off is that you are now carrying two exposures at once, so the holding cost has to be modelled against the return the next deal is expected to produce.
Covering a settlement or refinance shortfall
Bridging also covers a straightforward gap: an off-the-plan purchaser who has to settle before their own sale completes, a maturing senior facility that needs to be discharged before its replacement is documented, or a cost overrun that has to be funded before the next drawdown. In each case the bridge is a stopgap with a clear, near-term source of repayment, which is exactly the shape of risk a short-term lender is willing to price.
What does a bridging loan cost a developer?
A developer bridge generally costs more than a construction facility and much more than a residential mortgage, because the lender is taking short-term, fast-settling, often junior-ranked risk. As at July 2026, indicative pricing on a development bridge may typically run from around 8.5% to 14% per annum on a first mortgage, and materially higher, often 12% to 16% per annum, where the lender sits behind an existing first mortgage. Those numbers sit well above the residential bank bridging rates you will see advertised: Newcastle Permanent publishes a bridging rate around 7.5% per annum, La Trobe Financial quotes short-term bridging from around 8.3% per annum, and Westpac’s bridging comparison rate sits above 9% per annum. Even NAB’s residential bridging loan is priced on a standard variable home loan rate, a different risk to a fast-settling development bridge. Developer bridging is priced off the commercial, non-bank end of that spectrum, not the bank end.
The rate environment matters here. The Reserve Bank of Australia (RBA) cash rate sits at 4.35% per annum after the Board held it there in June 2026, following three increases earlier in the year as inflation picked up. Short-term lending margins have widened in that tighter environment, so a bridge quoted in 2025 may look cheaper than the same facility today. Treat any rate you are quoted as a point-in-time number and re-check it against the current cash rate.
The fees beyond the headline rate
The interest rate is only part of a bridge’s cost, and the fees can add several percent to the effective price over a short term. Expect to model an establishment or line fee of around 1% to 2% of the facility limit, charged up front and sometimes on the committed amount whether you draw it or not. On top of that sit valuation fees, the lender’s legal costs (usually passed through to you), your own legal costs, and an exit or discharge fee at the end. Because these are fixed costs spread over a short term, they lift the effective annualised cost sharply. A 1.5% establishment fee on a 6-month bridge is the equivalent of roughly 3% per annum on its own.
Worked example: the all-in cost of a settlement bridge
Take a developer settling a $3,000,000 infill site while the Development Application (DA) and construction finance are finalised. A first-mortgage bridge might advance around $1,950,000 (65% of the site value), for a 9-month term, at 10.5% per annum with interest capitalised, plus a 1.5% establishment fee and around $10,000 of legal, valuation and discharge costs.
| Cost line | Amount (indicative) |
|---|---|
| Capitalised interest, 9 months on ~$1.95m at 10.5% p.a. | ~$154,000 |
| Establishment fee (1.5% of $1.95m) | ~$29,250 |
| Legal, valuation and discharge | ~$10,000 |
| Total cost of the bridge over 9 months | ~$193,000 |
That is roughly 9.9% of the drawn amount for 9 months of finance, which annualises to an effective all-in cost closer to 13% per annum than the 10.5% headline. The lesson is the one that runs through every development finance decision: model the all-in cost over the actual term, not the advertised rate. A bridge that looks cheap on its coupon can be expensive once the fixed fees are spread over a short hold.
How much can you borrow, and how is a bridge secured?
A developer bridge is sized off the value of the security and capped well below it, so the lender has a margin if the exit slips. As a general guide, first-mortgage development bridging may typically reach around 65% to 75% of the current “as is” value of the site or completed stock, or around 60% to 65% of Gross Realisation Value (GRV) where the lender is pricing off the project’s end value. Second-mortgage bridging, sitting behind an existing loan, is usually capped lower on a combined basis. The lower the Loan to Value Ratio (LVR), the more comfortable the lender and the sharper the rate, which is why a modest bridge against a strong asset prices far better than a stretched one.
How lenders size a bridge: against current value or end value
The valuation basis is worth pinning down before you rely on a number, because “value” means different things at different points in a project. Pre-construction, a bridge is usually sized off the site’s current market value or its “as is” value. Over completed stock, it can be sized off the Gross Realisation Value (GRV) or the discounted “in one line” value a valuer would put on selling the remaining dwellings as a parcel. That “in one line” figure is typically lower than the sum of individual retail sale prices, so a residual stock bridge advances against a haircut version of your sell-down, not the headline Gross Realisation Value (GRV). Understanding how Gross Realisation Value (GRV) is assessed, and how a valuer discounts it for a bulk sale, tells you how much a residual stock loan will actually release.
First mortgage, second mortgage and caveat security
Bridging is secured in one of three ways, and the security position drives both the rate and the paperwork. A first-registered mortgage gives the lender the strongest position and the best pricing. A second mortgage sits behind an existing first-ranking lender, which means the first lender must consent to it (a deed of priority), and it is priced higher to reflect the junior position. A caveat is a lighter form of security a lender may register to protect a short-term advance, and it signals a higher-risk, higher-priced facility. If you are being offered a second-mortgage or caveat-backed bridge, it pays to understand what a caveat or second mortgage does and does not give the lender, and how it interacts with your senior debt.
Why the exit strategy is the whole deal
A short-term lender is lending against the exit, not against your project, so the exit strategy is the single thing that decides whether a bridge gets approved and at what price. Every bridge has to answer one question: how, and exactly when, does this get repaid? The credible exits are a construction facility drawing down, sales settling, or a refinance into longer-term debt. Lenders will test whether the exit is real: a Development Application (DA) that is likely to be granted, presales that are genuinely contracted, a refinance term sheet that is close to unconditional. A bridge with a vague exit (“we’ll sell or refinance, one of those”) is either declined or priced for the risk that it rolls. Build your exit before you build your funding request, and give the lender evidence for it, because a bridge that cannot exit on time becomes an expensive problem fast.
Is developer bridging regulated, and what protections apply?
Most development bridging is not regulated consumer credit, and that changes both how fast it moves and how much protection you get. The National Credit Code applies only to credit provided wholly or predominantly for personal, domestic or household purposes, or to buy or improve residential property for investment, under section 5 of the Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (NCCP Act)). A loan taken by a company or trust, or by an individual wholly or predominantly for a business or development purpose, generally falls outside the Code. In practice, that is most development bridging.
Being outside the National Consumer Credit Protection Act 2009 (NCCP Act) cuts both ways for a developer. On the upside, the lender does not have to run the responsible-lending and suitability assessments that slow a regulated loan down, which is a large part of why a business-purpose bridge can settle in days. On the downside, you do not get the consumer protections that come with regulated credit, so the contract terms, the default interest rate, and the enforcement provisions are whatever you negotiate and sign. Read the default rate and the extension terms carefully, because they are where an unregulated short-term loan can turn punitive if the exit slips.
One caution worth flagging: a lender cannot make a genuinely regulated loan unregulated just by having you sign a business-purpose declaration when the real purpose is personal. Where the declared purpose does not match reality, the declaration can be ineffective and the loan treated as regulated. For a real development deal held in a company or trust this rarely bites, but it is a reason to make sure the borrowing entity and the stated purpose actually match the deal.
Bank vs non-bank and private lenders: who writes developer bridging?
Non-bank and private lenders write most developer bridging, because the majors are generally too slow and too conditional for the job. A live site that needs to settle in a week does not fit a major bank’s credit process, and the banks largely do not offer fast, business-purpose bridging over development assets. The market is served instead by non-bank lenders, private credit funds and specialist short-term financiers who compete on speed and flexibility and charge for it.
That is part of a larger shift in Australian development funding. The Reserve Bank of Australia (RBA) March 2026 Financial Stability Review notes that lending by non-bank lenders and private credit has continued to grow strongly, with non-banks now around 6% of financial system assets and private credit assets under management reaching roughly $234.5 billion in 2025. The same review’s financial stability assessment records that this strong pace of lending has not, to date, come with a material erosion of lending standards at the aggregate level. Tighter bank settings have pushed more borrowers toward these lenders: from 1 February 2026 the Australian Prudential Regulation Authority (APRA) capped how much high debt-to-income residential lending the banks can write, which does not apply directly to development finance but adds to the momentum behind non-bank and private credit. For a developer, the practical effect is a deeper, more competitive short-term lending market than existed a few years ago, and a stronger case for shopping a bridge around rather than taking the first quote.
Because the market is fragmented and priced case by case, many developers arrange bridging through a broker who knows which funders are active on which asset types this month. A good development finance broker can be worth their fee on a bridge, where the difference between lenders on rate, Loan to Value Ratio (LVR) and speed is wide and moves constantly.
How bridging finance flows through your feasibility
A bridge lands in your feasibility as a capitalised holding cost that lifts total development cost and drags on your return, so it belongs in the model, not in a mental note. The interest does not disappear because it is short term; it accrues, it compounds while capitalised, and it comes out of your margin. The question a feasibility answers is whether the value the bridge preserves, or the deal it enables, is worth more than the cost it adds, and whether the timing genuinely works.
Interest as a capitalised holding cost
Bridging interest is almost always capitalised rather than serviced, so it grows the loan balance every month and is repaid at exit. That treatment matters for how you model it, and the distinction between capitalised and serviced interest changes both your cashflow and your peak exposure. Because the interest compounds onto the balance, a bridge that runs two or three months past its planned term costs more than a simple pro-rata of the rate would suggest. It also sits inside your broader land holding costs while you carry the site, alongside rates, land tax and insurance.
In a feasibility model, a bridge is entered as a short-term debt facility. In Feasly, that means adding it to the funding stack as a senior or second-ranking facility with its interest capitalised, so the model shows how the bridge lifts your peak debt exposure, moves your blended Loan to Value Ratio (LVR) and Loan to Cost Ratio (LTC), and reduces the Internal Rate of Return (IRR). Modelling it as its own facility, rather than folding it into the senior loan, is what lets you see the true cost of the timing gap you are bridging, and where it sits in the capital stack.
The tax treatment of bridging interest
Interest on borrowings to acquire and hold development land is generally a cost of holding that land, and for a developer carrying on a business it is generally deductible rather than caught by the vacant-land rules. Since 1 July 2019, the Australian Taxation Office (ATO) rules on holding vacant land have denied deductions for the costs of holding vacant land for many taxpayers, but there is an important exclusion where the land is held in the course of carrying on a business, which commonly covers property development. The Australian Taxation Office (ATO) sets out the detail in Taxation Ruling TR 2023/3. How the interest is ultimately treated (deductible when incurred, or carried into the cost of trading stock) depends on your structure and how the project is accounted for, so this is a point to confirm with your tax adviser rather than assume. The suggestion here is only that bridging interest is rarely a free cost and rarely simply lost, and its treatment can move your after-tax margin.
What a bridge does to your return
A bridge usually costs margin but can protect or improve the Internal Rate of Return (IRR), and telling those two apart is the point of modelling it. Because the Internal Rate of Return (IRR) is time-sensitive, finance that lets you settle a site sooner, sell stock at proper prices instead of a fire sale, or start the next project months earlier can lift the annualised return even though it adds an absolute cost. Model it both ways: the deal with the bridge and its cost, and the deal without it (the sale you would have to force, the site you would lose, the delay you would wear). If the bridge preserves more value than it costs, it stacks. If it only defers a loss, it does not.
Does bridging finance vary by state?
The bridging product itself does not vary much by state, because it is commercial, business-purpose lending offered nationally rather than a state-regulated product. A non-bank lender writing a bridge in Perth uses substantially the same structure as one writing in Parramatta. What varies by state sits around the bridge rather than in it, and there are two touchpoints worth knowing.
First, the security. Each state and territory runs its own Torrens land title register (for example New South Wales Land Registry Services, Land Use Victoria and Titles Queensland), and mortgage registration, caveats and enforcement follow that state’s land title legislation. The mechanics of registering and enforcing a second mortgage or caveat are therefore state-specific even when the loan terms are not. Second, duty. Most states abolished mortgage (loan security) duty some years ago, so the bridge facility itself generally does not attract duty, but the property acquisition the bridge helps you settle will attract transfer duty at that state’s rates. That duty is a real cost line in your feasibility, and rates and thresholds differ by state, so confirm the figure with the relevant state revenue office and carry it into the model as a cost. Feasly does not calculate duty for you, but you can enter it as a cost line and its cost assist can prompt typical state-specific costs for your development type.
Lender appetite also varies by market rather than by law. Non-bank and private funders tend to be deepest and most competitive in the larger New South Wales, Victorian and Queensland markets, and can be thinner or pricier for sites in smaller centres and regional areas, which shows up as a higher rate or a lower Loan to Value Ratio (LVR) rather than a different product.
Bridging finance in New Zealand
Bridging finance works on the same principle in New Zealand, with the main distinction being between “open” and “closed” bridging. A closed bridge applies where the exit is locked in, typically an unconditional sale with a confirmed settlement date, so the lender knows when it will be repaid and prices accordingly. An open bridge applies where the exit is not yet secured, for example stock that is not yet sold, which carries more risk and a higher price. New Zealand banks such as BNZ offer bridging, and specialist non-bank lenders serve the developer end of the market where speed and residual stock lending matter.
For a New Zealand developer, the most useful applications mirror the Australian ones: releasing the equity trapped in residual stock from a completed project so you can secure the next site, and covering the gap between settling a purchase and realising the funds from a prior project. Pricing is quoted in New Zealand dollars and moves with the Official Cash Rate and the lender’s risk appetite, so treat any rate as point-in-time, and confirm whether an open or closed structure applies before you rely on the number, because it changes both the availability and the cost.
How to keep a bridge from going wrong
Most bridges that hurt a developer fail on one of a few predictable points, and each is manageable if you plan for it before you sign. The recurring failure is the exit that does not land on time. A Development Application (DA) takes longer than expected, presales stall, or a refinance falls through, and the bridge rolls past its term into default interest. Because development bridging is usually unregulated, that default rate and the extension terms are whatever the contract says, so read them before you sign and price a realistic buffer into the term rather than the optimistic one.
The second failure is the valuation coming in below expectation, which shrinks the advance and can leave you short at settlement. Order the valuation early and size the deal off a conservative number, not the figure you hope for. The third is treating the coupon as the cost and ignoring the fees, which is how a bridge that looked like 10% per annum turns out to cost 13% or more once establishment, legal and exit fees are spread over a short term. Model the all-in cost over the real term. The fourth is stacking a bridge on top of already-tight gearing, so a small slip in value or timing pushes the combined position past what the security supports. A bridge is safest as a modest facility against a strong asset with a near, evidenced exit, and most dangerous as a stretched facility against a soft asset with a hopeful one.
Bringing it together
A bridging loan is a timing tool for a developer: short-term, property-secured finance that carries a site or holds completed stock across the gap until construction finance, sales or a refinance take over. Used well, it settles sites you would otherwise lose, holds stock off a fire sale, and releases equity to start the next deal sooner, and those benefits can protect or lift your Internal Rate of Return (IRR) even though the bridge adds an absolute cost. Used carelessly, it stacks expensive, capitalised interest onto a project with a shaky exit and eats the margin it was meant to protect.
The discipline is the same one that governs every development finance decision. Price the all-in cost over the real term, size the facility off a conservative value with an evidenced exit, understand that a business-purpose bridge trades consumer protection for speed, and model the bridge as its own facility in your feasibility so you can see what it does to peak debt, gearing and return before you commit. Get those four right and a bridge is a sharp tool. Get them wrong and it is one of the more expensive ways to fund a timing gap.
This guide is general information for property developers and other industry professionals, not financial, tax or legal advice. Bridging finance terms, rates and thresholds change, and every project sits in its own context. Confirm the current position with the relevant lender, the Australian Taxation Office (ATO) or state revenue office, and your own advisers before relying on it for a decision.