Private vs bank bridging lender — which is better in Melbourne?
Banks offer cheaper rates (around 6–9% p.a.) but require full income documentation and take 4–8 weeks to settle. Private bridging lenders settle in 5–14 days based on your exit strategy and property value, but cost 0.8–1.5% per month. Choose banks for clean PAYG owner-occupied deals; choose private for urgent settlements, self-employed borrowers, or complex security.
Side-by-side comparison
| Feature | Bank Bridging | Private Bridging |
|---|---|---|
| Settlement speed | 4 – 8 weeks | 5 – 14 days |
| Interest rate | 6% – 9% p.a. | 0.8% – 1.5% / month |
| Maximum LVR | 70 – 80% | 65 – 75% |
| Serviceability test | Full income & APRA buffer | Exit-strategy based |
| Loan size | $100K – $5M+ | $100K – $20M+ |
| Documentation | Full doc, payslips, tax returns | Light doc, valuation + exit |
| Best for | Owner-occupied, clean PAYG income | Self-employed, urgent, complex |
When a bank bridging loan wins
If you're an owner-occupier with PAYG income, a clean credit file, and at least four to eight weeks before your settlement date, a bank bridging product (typically structured as "peak debt" capitalising into your new loan) is almost always the cheapest route. Major banks price these around their standard variable rate, and interest is capitalised rather than paid monthly.
The catch is the credit assessment: full APRA serviceability on the combined peak debt, with the 3% interest-rate buffer applied. Many buyers in Melbourne's $2M+ market simply don't service on that test, even though their actual exit (sale of the existing home) is rock-solid.
When private bridging is the right call
Private bridging lenders assess on the exit, not on serviceability. If your existing Brighton home will sell for $3.2M and you need $1.8M to complete a Toorak purchase in nine days, no bank will move that fast and many won't approve at all. Private lenders look at the security, the exit, and the timeline — and price for risk.
Typical Melbourne use cases include: self-employed buyers without two years of tax returns, settlements where the existing home isn't sold yet, auction purchases with 30-day terms, GST or stamp-duty shortfalls, development-site acquisitions, and clients caught between a bank decline and a contract date.
Real cost on a $1M, 6-month bridge
- Bank: ~$35K interest (7% p.a. capitalised) + $2K fees, but 6+ weeks to settle and full doc required.
- Private: ~$60K interest (1.0% / month) + $10K establishment, settling in 7–10 days.
The $33K premium buys speed, certainty, and a deal you'd otherwise lose. For most Melbourne buyers in time-critical positions, that maths is easy — particularly when the property gain on a Toorak or Hawthorn purchase exceeds the cost of finance many times over.
How we structure the decision
For every Melbourne client, we model both paths against the actual timeline: contract date, settlement date, exit event, and serviceability position. If the bank path can clear the deadline cleanly, we always recommend it. If the timeline is tight, the income complex, or the security unusual, we move to a private bridging panel where we know which lender will say yes — first time.
Talk to us about property purchase bridging, auction finance, or business bridging and we'll model bank vs private side by side against your actual deal.
People Also Ask
Banks apply APRA serviceability rules including a 3% buffer on combined peak debt. Many buyers — especially in Melbourne's $2M+ market — don't service that test even though their real-world exit is certain. Private lenders fill that gap by lending against the exit strategy itself.
Talk to us →Most private bridging in Melbourne is non-NCCP (business-purpose or investment) and sits outside consumer credit regulation. Reputable private lenders still operate under ASIC AFSL or are sponsored by an AFSL holder, and use standard registered mortgages with full legal documentation.
Yes — and it's the most common exit strategy. Once your existing property sells or your tax returns are lodged, we refinance the private bridge into a long-term bank loan, often within 3–6 months. We plan that exit at the start of every deal.
Get in touch →Where this applies in Melbourne
See how this strategy plays out in the suburbs where we most often arrange this kind of finance.
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