How do lenders assess a bridging loan, on peak debt or end debt?

Bridging finance lets you buy your next home before your current one sells, but whether it works for you depends heavily on how the lender assesses the debt. The key concepts are peak debt and end debt. Here is how they differ and why it matters.

What bridging finance is

A bridging loan covers the gap between buying your new home and selling your existing one. For a period you effectively owe both, and the bridging facility funds the new purchase until the old property sells and the proceeds pay down the debt.

Peak debt and end debt

Peak debt is the total you owe during the bridging period, when you hold both properties, before the old one sells. End debt is what remains after your existing home sells and the proceeds are applied. The difference between the two is, broadly, the expected sale proceeds of your current home.

How lenders assess it

Some lenders assess your serviceability on the end debt, recognising that the peak debt is temporary and will reduce once the old property sells. Others assess on the peak debt, effectively wanting comfort that you could service both loans. Which approach a lender takes is central to whether bridging is feasible for you.

Why end debt assessment helps

Assessing on end debt is generally more accommodating, because it does not require you to demonstrate you can service both mortgages simultaneously. For many borrowers, servicing both at once would be a stretch, so a lender that assesses on the end debt opens up bridging that peak debt assessment might rule out.

The role of the sale

Because the end debt depends on selling your existing home, lenders pay close attention to the expected sale price and how realistic it is. A conservative, well supported estimate of the sale proceeds gives a lender confidence in the end debt figure, which underpins the assessment.

Bridging has its own risks

Bridging carries risks, including the possibility that your existing home sells for less than expected or takes longer than planned. Interest accrues during the bridging period, and a sale that is slow or below expectations affects the end debt. These risks should be weighed before committing.

Match your situation to the right lender

Because bridging assessment varies, the useful step is to match your situation to a lender whose approach suits, ideally one that assesses on end debt where that is what you need. A broker who works with bridging finance can identify suitable lenders and structure it, usually at no cost to you. This is general information, not advice.