Mortgage and Lending : Bridging Loan
Mortgage and Lending : Bridging Loan, | 19/07/2023
Mortgage & Lending – Bridging Loan
Are you considering buying a new home but still need to sell your current one?
If so, you may be considering a bridging loan. A bridging loan is a short-term loan that can help you bridge the gap between buying your new home and selling your old one.
How does a bridging loan work?
A bridging loan is typically an interest-only loan secured against your existing property. In a competitive market, this type of loan bridges the gap between purchase and sale, so you can take advantage of timing.
You could potentially borrow up to 80% of the combined value of the current and new properties with the intention to retain only 80% debt on the new property after sale of the current one.
Bridging loans typically have a term of 12 months and may not be extended beyond this time. The interest rate on a bridging loan is usually higher than the interest rate on a traditional home loan.
Who needs a bridging loan?
Bridging loans are often used by people who want to settle their purchased property before selling their existing one. It is also helpful for those who need to renovate their existing home and need extra time to sell.
Benefits of a bridging loan
There are several benefits to using a bridging loan, including:
- You don’t lose out on your dream home while waiting for your existing home to sell; and
- Allows you to borrow 100% of the purchased property plus associated costs or over your maximum borrowing capacity because you have an existing property to sell and pay down your debt
Risks of a bridging loan
There are also some risks associated with using a bridging loan, including:
- Higher Interest rate;
- No offset or redraw facilities; and
- If you cannot sell your old home within the specified time frame, you may lose your property
Still trying to figure out if that’s what you need?
If you are considering a bridging loan or are unsure what loan product you need for your unique situation – you should speak to a lending professional.
Our mortgage specialists offer a no-obligation, free consultation to assess your situation and guide you through what type of loan you need.
Important Update – Still here, albeit from afar
We’re here for you now as we always have been, committed to providing you support and the high level of service you’re used to, when you need it most.
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