Bridging Loans: Buying Before You Sell

A bridging loan is short term financing that covers the gap between buying your next property and selling your current one, usually secured against the incoming sale proceeds. It lets you commit to a purchase before your existing home closes, but it carries its own interest cost and repayment risk if the sale is delayed.

Money: what a bridging loan actually costs

A bridging loan is normally interest only for the period you hold it, with the full principal due once your old property closes and repays the loan. Some banks structure it as a separate short term facility, others fold it into the new home loan and unwind it once your sale completes.

The rate and the exact structure are set by each bank, and they change with the funding environment, so this article will not quote a number for you. Ask your banker for a written quote that states the rate, the fees, and what happens if your sale slips past the agreed date. Treat any rate you read online as a starting point for that conversation, not a fact to plan around.

Beyond interest, expect legal fees for the extra facility and, in some cases, a fresh valuation if the bridge is renewed. Your lawyer and banker should walk you through the full fee stack before you sign the option to purchase on the new property.

Timing: buying before you sell and the ABSD refund clock

If you still own your existing residential property when you buy the next one, Additional Buyer Stamp Duty is payable upfront on the new purchase. Singapore Citizen married couples who buy the new property jointly can apply to IRAS for a full ABSD remission if they sell the existing property within 6 months of the new purchase completion for a resale, or within 6 months of the temporary occupation permit or certificate of statutory completion for a property bought uncompleted.

IRAS has said it will not extend that 6 month window, and missing it means the ABSD already paid is not refunded, with clawback and interest applied if a refund was granted and then reversed. This is the real deadline behind a buy before you sell decision, and it sits on top of whatever bridging tenure your bank offers.

When your old property finally sells, the sale proceeds do not all come to you as cash. The outstanding home loan is cleared first, then the CPF principal you withdrew for that property plus its accrued interest is refunded to your CPF account, and only what remains after those two items and other sale costs reaches your bank account. Budget the bridge repayment against that net figure, not the headline sale price.

Safety: what has to be true before you bridge

Bridging is a bet that your existing property sells on schedule. Reduce that bet before you take it.

• Have a firm buyer, meaning an exercised option to purchase on your old property, not just verbal interest, before you sign for the new one.
• Get the bridging terms in writing, including what happens if your sale completion date moves.
• Check the bridge against your Total Debt Servicing Ratio. Under current MAS rules the TDSR ceiling is 55 percent of gross monthly income for most property loans, and carrying two mortgages at once, even briefly, counts against that ceiling.
• Confirm with your lawyer how the two completion dates line up, and what your fallback is if either side slips.

What the bank actually wants to see

A bank underwriting a bridge is really underwriting the sale of your old property, not the new one. Expect it to ask for the exercised option to purchase or sale and purchase agreement on the property you are selling, evidence of the buyer's own financing where available, and a recent valuation on both properties. The stronger and more documented your old property sale is, the more comfortable the bank is with a shorter bridge at better terms.

If your old property has not yet found a buyer at all, most banks will decline to bridge, or will only do so against a much smaller amount, since they are effectively financing an assumption rather than a transaction in progress. This is the practical reason the firm buyer requirement in the checklist above matters more than the interest rate itself.

The alternative: selling first

Selling your existing property before you commit to the next one avoids a bridge entirely. Its cost is different, not absent: you may need to time a temporary rental or stay with family between the two moves, and you risk losing a property you want if another buyer moves faster while you wait for your own sale to close.

Which path suits you depends on how competitive the market is for the property you want to buy, how quickly your own property is likely to sell, and how much uncertainty you can carry. Neither path is automatically cheaper once you account for the full picture, so run both scenarios with your banker before deciding.

Frequently asked questions

Related reading: the bridging loan playbook, how to claim your ABSD refund, stress testing your TDSR, and buying HDB resale before selling private property.