Buying a new home before selling your current one can be hard on your finances. This is especially true for the down payment. This is where a bridging loan comes in.
In this article, we break down what bridging loans are, how they work in Singapore, and whether it makes sense for you to use one.
What Is a Bridging Loan?
A bridging loan is a short-term loan. It helps you cover the gap between buying a new property and getting money from selling your old one. You typically use it to cover the down payment on your next property purchase before you sell your existing home.
When Do People Use a Bridging Loan?
You might consider a bridging loan if:
- You’re buying a new property before selling your existing one.
- Your sales proceeds are not in yet before the completion date of your new purchase. You need funds for the down payment, which is usually 15–25% or more, especially for bank loans.
- You want to secure your next home quickly without waiting for the full proceeds from your current sale.
How Does a Bridging Loan Work?
- Loan Quantum: This is usually the amount of money you expect to get from selling your current property. It also includes any CPF OA funds you get back after selling your existing property.
- Tenure: Typically up to 6 months.
- Repayment: Interest servicing monthly until Full repayment (principal) once you receive the sale proceeds and or CPF refunds.
- Interest Rate: Generally 4.25–6.5% p.a., charged monthly on the disbursed amount, depending on the lenders. Different lenders charge different interest rates.
Example Scenario
Let’s say:
- You’re buying a new condo at $1.5 million.
- You’ve yet to receive $500,000 from selling your existing home.
- You need to pay $375,000 (25%) in downpayment to secure the new unit.
A bridging loan allows you to borrow part or all of the $375,000 short-term. Once you complete your sale and the system credits $500,000 to your account, you repay the loan in full without early repayment penalties.
Types of Bridging Loans in Singapore
Simultaneous Repayment Bridging Loan
- You start paying interest immediately (monthly), even before your property sells.
- Lower interest cost by targeting full repayment as quickly as possible.
Pros of Using a Bridging Loan
| Advantage | Why It Matters |
| Buy before you sell | Avoid losing a desired property while waiting for funds |
| Smooth cashflow | Helps you pay the downpayment without liquidating investments |
| Easy approval | Banks can approve the request so long as there are nett sales proceeds or returning CPF OA. |
| Flexible repayment | Full settlement once the sale completes (no penalty for early payment) |
B. Resale HDB Flats
| Disadvantage | What to Watch Out For |
| Higher interest rate | Bridging loan rates are higher than standard home loan rates |
| Short tenure | You must sell your home and repay quickly—within 6 months |
| Double financial commitment | You may be servicing both home loans if your existing home hasn’t sold |
| You must sell your home and repay quickly, within 6 months | Bank approval depends on your sale agreement and financial profile |
Should You Use One?
- You’ve already exercised the Option to Purchase (OTP) on your new home.
- You have committed buyers for your existing property (i.e., sale is under contract).
- You want to avoid losing a competitive unit while waiting for sale proceeds.
- You have a clear exit strategy to repay the bridging loan within the loan period.
Avoid using it if:
- You’re not confident of selling your existing property within 6 months of the bridging loan disbursement.
- You already maxed out on TDSR or you service multiple loans.
- You don’t want to risk paying interest on two properties.
Final Thoughts
A bridging loan helps buyers get a new property before selling their current one. However, it may not be right for everyone. Consider your cash flow, timeline for sale, and risk appetite before taking it up.
If used wisely and with a clear repayment plan, it can provide flexibility and peace of mind in a tough housing market.