The Easiest Way to Fund a Development Site Purchase

When Development Opportunities Don't Wait for Traditional Finance

A development site becomes available at the right price, but your capital is tied up in another property or you're waiting on DA approval before securing construction finance. Bridging finance gives you 6 to 12 months to acquire the site now and arrange permanent funding or sell an existing asset later.

How Bridging Finance Works for Development Site Purchases

Bridging finance is a short term loan secured against property you already own, designed to fund a purchase when timing doesn't align with traditional finance. The loan amount typically covers the site purchase price, with lenders assessing loan to value ratio across both the security property and the site being acquired. Interest is usually capitalised during the bridging period, meaning you don't make monthly repayments but the interest adds to the total loan amount. The loan term is typically 6 to 12 months, with an exit strategy required at application.

In our experience, developers in San Remo often use this structure when a waterfront or island-adjacent site becomes available but they're mid-project elsewhere or waiting on planning approvals. The capitalised interest approach means you're not servicing two loans while managing development timelines.

What Lenders Assess in a Bridging Loan Application

Lenders want certainty around your exit strategy before approving bridging finance. That exit might be selling the security property, refinancing once the development site has planning approval, or rolling the debt into construction finance once the project begins. They'll assess the combined loan to value ratio across your existing property and the new site, typically lending up to 70% to 75% of the combined value for development purposes.

Consider a developer who owns a commercial property in Wonthaggi valued at $800,000 with no debt, and identifies a development site in San Remo for $450,000. A lender might approve bridging finance for the $450,000 purchase based on security over both properties, resulting in a combined LVR of around 36%. The exit strategy is to obtain DA approval within six months, then refinance into construction finance that covers both the site value and build costs.

Bridging Finance Costs and How They're Structured

Bridging loan fees typically include an establishment fee, legal costs for the lender, and valuation fees for both the security property and the site being purchased. The bridging loan interest rate sits higher than standard variable rates, reflecting the short term nature and higher risk profile. Because interest is capitalised, you'll pay interest on interest as the loan balance grows each month.

For the scenario above, a bridging loan of $450,000 at a capitalised variable interest rate over six months would add roughly $15,000 to $18,000 to the total debt, depending on the rate offered. Add establishment fees and valuation costs, and total bridging finance costs might reach $22,000 to $25,000. That cost is weighed against the opportunity cost of missing the site purchase or the carrying costs of holding another property longer than necessary.

San Remo Development Sites and Timing Pressures

San Remo sits at the gateway to Phillip Island, and development sites close to the waterfront or with island views don't stay on the market long. The local market sees interest from Melbourne-based developers looking for tourism-related projects, as well as local buyers seeking to capitalise on the area's growing visitor economy. When a site becomes available, the window to secure it is often measured in weeks, not months.

Bridging finance application timelines can be as short as 7 to 10 days for fast approval, particularly when the security property has a clear valuation and the borrower has a documented exit strategy. That speed matters when competing against cash buyers or investors with pre-approved funding.

Bridging Loan Settlement and What Happens Next

Once the bridging loan is approved, settlement on the development site proceeds as it would with any property purchase. The lender registers a mortgage over both the security property and the newly acquired site. During the bridging loan term, you're expected to execute your exit strategy, whether that's selling the security property, obtaining development approval to trigger construction finance, or refinancing based on the combined asset value.

If the exit strategy doesn't materialise within the agreed bridging period, most lenders will consider an extension, but that comes with additional fees and a reassessment of the loan. Bridging loan risks include the possibility that your exit strategy is delayed, meaning you're carrying capitalised interest for longer than planned or facing pressure to sell at a suboptimal time.

Bridging Loan Alternatives and When They Make Sense

Not every development site purchase requires bridging finance. If you have sufficient equity and serviceability, a standard investment loan or commercial loan might work, particularly if you're prepared to service monthly repayments during the holding period. If the site purchase is small relative to your existing asset base, a line of credit or equity release might offer more flexibility without the same cost structure.

Bridging finance makes sense when timing is the constraint, not capital. If you need to move quickly, can't service a second loan during the interim period, and have a clear exit within 6 to 12 months, the structure aligns with the problem you're solving. If you're unsure whether your circumstances suit bridging finance or another structure, a conversation with a broker who understands development finance will clarify which approach fits your timeline and risk tolerance.

Call one of our team or book an appointment at a time that works for you. We work with lenders across Australia who offer bridging finance for development site purchases, and we'll structure the application around your exit strategy and the specific site you're acquiring.

Frequently Asked Questions