Bridging Loans

Looking to sell your home and buy a new one! But not looking forward to paying rent while waiting to move in, and the stress of having to move all your furniture twice.

A bridging loan could be the right one for you!

Bridging Loan or Bridging finance is a loan structure that is suitable for clients that are looking to purchase a new property before selling their existing property, and so they will require a bridging loan that will incorporate their existing loan as well as a new loan for the new property.  

It allows them to purchase the new home prior to selling the previous home. A bridging loan usually gives the home owner 6 months to sell their existing home and purchase a new home.  In some case’s an extension can be obtained.  

There are two possible outcomes to the completion of your move.

1. You have no debt remaining

2. You have a debt remaining. This is known as End Debt.

For example: Whilst waiting for your old home to sell, you can move into your new home. You will have a loan on both homes, and the lender will use both properties as securities for that loan.

When the sale of the old home is completed, the proceeds from the sale will be directed to your loan and will either reduce the current balance or pay the loan out.  

If the loan is completely paid and discharged, then this is known as a Bridging Loan with No End Debt. If there is an amount outstanding, then this is known as a Bridging Loan with End Debt.

Loan Term: 

Usually with a bridging loan you will have up to 6 months to sell your existing home. Once the old home is sold, then the loan will revert to a product of your choice.

Advantages:

• Allows you to buy or build a new home, before selling your current home
• Potential save or rent while waiting to purchase and move into a new home
• May not have to make bigger repayments on a larger loan. As the interest can be capitalized.
• Eases the stress, allows the purchase of the new home to be completed while waiting for the proceeds from the sale of the old home.

Disadvantages:

• May end up paying interest on two loans. (This could potentially overcome by renting the old home out to help with repayments.)

Other things to consider are:

If the sale of the old home takes longer than expected the interest accumulated could reduce the amount of equity that you have. As the interest that is accumulated will be added to the loan and the amount of the Loan to value Ratio will decrease.

If you would like to discuss your specific circumstances call our message service on 1300 700 496 with your name and number and we will contact you back.

Alternatively text your name and number to 0411 320 962 and we will call you.