- When buying before selling existing home
- Allows you to act fast
- Good if you have equity
- Provides 6-12 months to sell
- Flexible payment options
Bridging finance loans
Bridging Loans or Bridging Finance is generally used when a homeowner purchases another property that will settle before their existing house is sold.
Lenders will assess the level of equity available in your existing home based on the bank valuation, and if approved will provide the entire purchase amount plus fees on your new home. This allows you time (typically up to 6-12 months) to try and sell your old home after the settlement of your new home.
In some cases, the bank will require only the interest on the bridging loan to be paid for the bridging period, or the interest can be capitalised on to the new loan meaning no repayments during the bridging period, therefore providing you with extra cash-flow whilst you move into your new home.
Benefits:
- Allows you to purchase a new property before having sold your current one
- Interest only payments during the bridging period can mean extra cash available during your move where there can be additional expenses related to moving costs
- Interest can be capitalised onto the new loan meaning no repayment over bridging period
Disadvantages:
- Interest rates may be slightly higher than standard loan
- Usually incurs higher fees and costs due to 2 properties needing to be valued and effectively two loans being taken out, the bridging loan and then the final loan after final settlement
- Risks associated should you not be successful in selling your existing home, may be forced to sell as below market price
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.