What does it mean when bridging interest is capitalised?

Instead of you paying the interest each month, the lender adds it to the loan balance. The balance grows every month of the bridge, and the following month's interest is charged on the larger figure. When your property sells, the proceeds pay out the original bridging amount plus all the interest that was added, and you continue with the remaining loan on the new home.

Is capitalised interest cheaper than paying interest only?

No. The interest is the same either way; capitalising changes when and where it is paid, not how much. Because the added interest itself attracts interest, a capitalised bridge that runs for a long time can end up costing slightly more, and every dollar of it comes out of your sale proceeds before you see them.

How long does a bridging loan last?

Most lenders allow between six and twelve months to sell. If the sale has not happened by the end of that window the arrangement is usually reviewed, which can mean repayments starting, a different rate, or the lender asking for a plan. The bridging period is the main thing that decides how expensive a bridge turns out to be.

Does the lender still assess whether I can afford the loan if interest is capitalised?

Yes. Capitalising the bridge interest removes the monthly repayments during the bridge, but the lender still needs the end debt, the loan you will be left with after the sale, to service on normal terms. Some lenders assess your income against that end debt with the bridging interest added on top; others assess against the full peak debt.

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Straight Answers · Bridging finance

Do I make repayments during bridging finance?

Bayley Clarke · Mortgage broker on the road · Reviewed 24 August 2026 · 4 min read

The short answer

It depends on the bank that you’ve gone to for your bridging finance. Some banks will want you to make interest only repayments while you’re bridging.

Others, what they’ll do is they’ll capitalise the interest, add it every single month on top of your loan, knowing that once your property is sold, that will be paid out and you’ll just have your ongoing loan from there on out. So some banks will make you do interest only repayments while you’re waiting to sell. Others will just add the repayments onto your loan and you pay it out later.

The 30 second version. Everything below is the detail underneath it.

Two ways to carry the same debt

During a bridge you owe the peak debt: your old loan, plus the whole new purchase, plus costs. Interest is charged on that figure every month until the sale. The question is only who pays it and when. Lenders split into two camps, with a third in between.

Model	During the bridge	At the sale	Who it suits
Interest paid monthly	Interest only repayments on the peak debt, out of your pocket, every month	Proceeds clear the old loan and the debt drops to the end debt, no catch up	Households whose income can carry both loans for the period
Interest capitalised	No repayments. Each month’s interest is added to the loan balance	Proceeds clear the old loan plus every month of interest that was added	Households who couldn’t carry two loans, or who’d rather keep the cash
A split of the two	Repayments on the end debt portion, interest capitalised on the part the sale will clear	Proceeds clear the bridging portion and its added interest; the end debt continues as normal	People who want to be paying the loan they’ll keep from day one

None of these change what the bridge costs in total. Interest is interest. What they change is where the money comes from: your pay each month, or the proceeds of the sale at the end. And that’s not a small difference, because the peak debt is usually more than double either loan on its own.

Why lenders pick one or the other

A lender that wants the interest paid monthly is doing two things. It’s proving, month by month, that you can actually carry the debt, and it’s keeping the balance flat so the end debt on sale day is exactly what everyone expected. The cost to you is cash flow. Interest on the peak debt is a big monthly number, and it lands on top of rent or the repayments you were already making.

A lender that capitalises the interest is accepting that most people can’t comfortably pay for two houses at once, and is happy to be repaid out of the sale instead. The cost to you is quieter. Every month’s interest is added to the balance, and the next month’s interest is charged on the new, bigger balance. It compounds. On a short bridge that’s a modest amount. On a bridge that drags out, it’s the difference between the end debt you planned and the one you get.

Whichever model applies, the lender still needs the end debt to service on ordinary terms. Capitalising the bridge interest doesn’t remove the servicing test, it moves it to the loan you’ll be left with. That’s why some lenders assess you on the end debt with the bridging interest added, rather than on the full peak.

Four things that catch people out

Capitalised isn’t free. No repayments during the bridge feels like a saving. It isn’t. Every dollar of interest comes straight out of the sale proceeds before you see them, so the deposit you thought you were rolling into the new place is smaller than the sale price suggested.
The bridging window has an end date. Most lenders allow somewhere between six and twelve months. If the sale runs past that, the arrangement is usually reviewed: repayments can start, the rate can change, or the lender can ask what the plan is. A slow campaign is the single most common way a bridge gets expensive.
A lower sale price hits the end debt, not the peak. The peak is fixed the day you settle on the purchase. If the sale fetches less than the plan assumed, every dollar of shortfall stays on the loan you keep, on top of any capitalised interest. Build the plan on a conservative sale figure, not the agent’s best case.
Check who holds your old loan during the bridge. Usually the bridging lender refinances your existing loan so both properties sit with one lender. If your current loan stays where it is, its repayments keep running in parallel with whatever the bridge asks of you.

What to bring, and what to ask

Your current loan statement, the price you’re buying at and a conservative sale figure give me the peak debt and the end debt. Your payslips and a rough picture of monthly spending tell me whether paying the interest monthly is realistic or whether a capitalising lender is the only sensible structure.

Then the question isn’t “do I make repayments.” It’s “what does a month of this bridge cost, can we pay it as we go, and if we can’t, how much bigger is the loan we keep at the end.” Three numbers, and they decide which lenders are even in the conversation.

This page describes how bridging and simultaneous settlements generally work as at August 2026. Individual lenders aren’t named on purpose: bridging terms move, and the right structure depends entirely on your situation rather than on a list in an article. The other bridging answers on the list: peak debt versus end debt and whether you have to sell before you buy.

Working out whether you can carry a bridge?

Send me your loan statement and the two prices and I’ll show you the peak debt, the end debt, and what a month of the bridge costs under the pay-as-you-go model and the capitalised one, so you can see the cash flow before you commit to buying first. Takes maybe ten minutes and it costs you nothing.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the numbers.

Next question

Peak debt vs end debt in bridging finance

The two figures every bridging decision comes back to, and why which one the lender tests decides whether you get approved.