A bridging loan exists to solve one specific problem: money for the next home falls due before the money locked in the flat has been released. Used for that, it is a timing tool, short and unglamorous. Misread as extra borrowing power, it becomes an expensive way to discover that the budget was wrong.
What is a bridging loan, in plain terms?
A short-term facility secured against the confirmed proceeds of your sale. The bank can see the money coming, an exercised option, a completion date, a computable net figure, and lends against it so the purchase does not have to wait. The typical structure is interest-only while it runs: interest is paid month by month, and the principal is repaid in one lump sum when the sale completes and the proceeds arrive.
Approval is bank-specific, and the facility sits outside the standard TDSR mechanics that size your main mortgage. That does not make it casual money. It makes it a separate credit decision with its own conditions, and different banks draw those lines differently.
What a bridging loan is not
It is not additional long-term borrowing capacity, and this is the misunderstanding that causes real damage. A bridge brings forward money you already have sitting inside the flat; it cannot create money you do not have. If a purchase only works when the bridging loan is counted as extra budget, the purchase does not work, and the bridge will make that discovery more expensive rather than less.
A worked example, fully illustrative
Round numbers, invented for clarity, not quotes. This is the common sizing logic for a completed property; the recognition rate and the exact structure vary from bank to bank.
| Item | Amount |
|---|---|
| Selling price of the flat | $1,000,000 |
| Recognised by the bank, typically 95% of the sale price | $950,000 |
| Less outstanding housing loan | $200,000 |
| Maximum bridging the sale can support | $750,000 |
| CPF bridging portion (the CPF refund: principal plus accrued interest) | $250,000 |
| Cash bridging portion (the remainder) | $500,000 |
The sizing runs in that order. First, the bank does not lend against the full sale price: for a completed property it typically recognises about 95%, keeping a margin so the facility never outruns the money actually arriving, since costs such as the agent’s fee and legal fees also come out of the proceeds. Next, the outstanding housing loan is netted off, because it is repaid first the day the sale completes. What remains is the money genuinely returning to the family, and it returns in two forms, a CPF refund and cash proceeds. The bridge splits the same way: a CPF bridging portion, capped at the refund and repaid from it on completion, and a cash bridging portion for the rest.
Suppose this family is buying at $1,500,000 and a stage of the purchase requires roughly $300,000 before their flat sale completes, part of it payable with CPF and part in cash. The facility above covers both sides of that gap: interest-only for the weeks it runs, repaid in full the day the sale completes and the proceeds and CPF refund are released.
What the family actually pays for the bridge is the interest over those weeks, at whatever rate their bank quotes for the facility. On sums this size, even a short bridge is a real line in the budget, and it should be priced with the bank’s written numbers rather than assumed away.
What does it really cost, beyond the bridge itself?
Three layers, and only the first is on the facility’s paperwork.
The bridge: interest that grows with every week the sale takes to complete.
The carry: the new home’s full mortgage instalment starts while the old money is still in transit, so for the life of the bridge the household services both commitments at once.
The tail: the facility is short by design, and a sale that drags tests both the bank’s patience and the household’s reserves. The clean way to see the cost is as one combined figure, bridge plus carry, over a realistic estimate of the gap, with a margin for the gap running long.
What is worth asking before relying on one?
The questions that surface the real terms. What does this bank accept as confirmed proceeds, and at what stage of the sale does the facility become available? What happens if the sale completion is delayed? How is interest charged, and what exactly triggers repayment? Does the facility cover the cash portion of the purchase, the CPF portion, or both? What documents and lead time does approval need? A bank whose answers stay vague on any of these is telling you something useful about how the facility will behave under stress.
The honest caveats
There is no standard bridging product. The structure described here, short, secured against confirmed proceeds, typically interest-only until completion, is the common shape at the time of writing, but the terms that matter live in a specific bank’s letter of offer, and every figure in the example above is illustrative. A bridge solves timing and only timing; affordability is decided by the mortgage, the proceeds and the budget. Verify the facility’s terms with your bank and your lawyer before any date in the purchase depends on it.