Quick answer
A deposit bridge is a short-term loan that pays the deposit on a commercial property when contracts are exchanged, while the money you'd normally use is tied up in another property, a sale or a refinance. It's repaid when that equity is released, often at or before settlement of the purchase. Lenders look at the contract, the security, the release of funds and the plan for completing the purchase itself.
Key points
- Covers the deposit only; the main purchase funding still needs to be in place
- Repaid when equity is released from a sale, refinance or other source
- Losing the deposit is the main risk if the purchase can't settle
- Short, specific and easier to evidence than a full bridge
- Exit
- Release of equity or settlement funding
- Typical term
- Short: to or around settlement
- Security
- Another property with equity
- Property-secured range
- $20k – $5m
Sometimes the whole gap is just the deposit. You’ve found the right commercial property, the long-term finance is realistic, and the equity to fund the deposit exists. It’s just not cash yet: it’s sitting in another property, or in a sale that hasn’t settled, or in a refinance that’s still being processed. Meanwhile the vendor wants to exchange this week.
A deposit bridge is the smallest bridge in the family. Event A is exchange, when the deposit is due. Event B is when your own funds are released, often around the settlement of the purchase itself.
When does a deposit bridge make sense?
- Your equity is in another property and there isn’t time to refinance it before exchange.
- You’re selling other property, and its settlement will fall after the exchange on the new one.
- A refinance will release cash, but not in time for the deposit.
- An opportunity won’t wait: an off-market deal, an auction or a vendor with other buyers circling.
It doesn’t make sense if the main purchase funding isn’t realistic. A deposit bridge buys you a signed contract; it doesn’t settle it. If you can’t complete, the deposit is exposed.
How is a deposit bridge different from a full bridge?
| Deposit bridge | Full buy-before-you-sell bridge | |
|---|---|---|
| What it funds | The deposit only | The purchase price and costs |
| Term | Short, to around settlement | Until your sale settles, plus buffer |
| Security | Another property with equity | Usually both properties |
| Exit | Equity release or settlement funding | Sale of your existing property |
If the deposit is only the first problem and you’ll also need to fund settlement before your sale completes, read buying before you sell and look at the whole structure together. It’s usually simpler to arrange one bridge than two.
What does a lender check?
- The contract: price, deposit amount, settlement date and any special conditions.
- The security for the deposit bridge, typically another property with equity. For a short, smaller gap, a caveat bridge may be used.
- The funding plan for settlement: an approval, a realistic application, or the sale that will provide the funds.
- The release event that repays the deposit bridge, and its timing.
Think of it as two exits. The deposit bridge exits when your funds are released. The purchase itself exits into your long-term finance. Both need to stand up.
Exchange date set and equity locked up elsewhere? Ask about a deposit bridge before the vendor moves on.
Don’t forget the other Event A costs
The deposit isn’t the only thing due around a commercial purchase. Transfer (stamp) duty, legal costs and adjustments all fall due by settlement. Each state and territory has its own duty rules, so check with the revenue office where the property sits, such as the State Revenue Office Victoria, and include duty in the purchase costs you enter in the bridging calculator. If peak debt starts to look heavy, our page on peak debt and end debt covers ways to bring it down.
An illustrative example
A physiotherapy group wants a ground-floor medical suite that has come up off-market. The vendor will exchange this week with a deposit of $95k. The group has plenty of equity in a residential investment property the directors own, and a bank has indicated it will lend against the suite once a valuation is done, but refinancing the investment property to free the deposit would take weeks.
A short bridge secured over the investment property pays the deposit on exchange. At settlement, the bank’s loan funds the balance, and the directors refinance the investment property to repay the deposit bridge shortly after. The term runs a few months past settlement to allow for that refinance. (Illustrative scenario.)
How long should a deposit bridge run?
At least until the event that repays it, plus a margin. If that event is the settlement of the purchase, add time for a delayed settlement. If it’s your own sale or refinance, allow for that to slip too. Our guide to bridging loan terms explains why a slightly longer term is almost always better than an extension later.
What are the risks of a deposit bridge?
A deposit bridge is small, but the commitment it secures is large. The main risks:
- Failing to complete. If the main purchase funding doesn’t come through, the deposit and more may be at risk under the contract.
- The release event slipping. If your own sale or refinance is late, the deposit bridge runs longer than planned.
- Double exposure. You may be carrying the deposit bridge and the full purchase at the same time for a period.
Reducing those risks is mostly about preparation: confirm the settlement funding is realistic before you exchange, choose a term that covers a delay, and know which asset repays the bridge. If the settlement funding is still uncertain, it may be better to negotiate a longer settlement period before exchanging.
Secure the contract, then complete it calmly
If the deposit is the only thing between you and the right premises, it’s a very solvable problem. Tell us the purchase price, the deposit, the exchange date and where your equity sits. The enquiry takes a minute, there’s no credit check when you first enquire, and your details stay with one team rather than being farmed out. A specialist calls you to map both exits.
Please give us accurate figures for the property values and existing loans. It’s what lets us move quickly when exchange is days away.
Frequently asked questions
What is a deposit bridging loan?
It's a short-term loan used to pay the deposit on a property purchase when your own funds aren't available yet, for example because they're tied up in another property or waiting on a sale. It's repaid when those funds are released.
Is a deposit bridge the same as a deposit bond?
No. A deposit bond is a guarantee given to the vendor in place of a cash deposit, and the vendor must agree to accept it. A deposit bridge is a loan that provides actual cash for the deposit. Which suits you depends on the contract and the vendor.
What happens to the deposit bridge at settlement?
It's usually repaid from the main settlement funding or from equity released elsewhere, such as your own sale settling. The plan for the whole purchase needs to be clear before the deposit is paid.
What if I can't complete the purchase?
Depending on the contract, a buyer who fails to complete can lose the deposit and face further claims. That's why lenders want to see that the purchase funding is realistic, not just the deposit.
Can I use a deposit bridge at auction?
Only if everything is arranged before auction day, because the deposit is usually payable when the hammer falls and the contract is signed. Plan it well ahead of the auction.