Bridging finance loans

  • 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 Loans or Bridging Finance is generally used when a home owner purchases another property that will settle before their existing house is sold.

The bank 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 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
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FAQs
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Depends on the size of your deposit, the value of the property, and your servicing capacity (based on your income and how much you are able to repay).

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Most mortgage lenders will require a deposit of 20% or more of the property price. Less may be required however will require mortgage guarantee insurance in most cases

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Depends on the type of loan, intrerestr rate, payment term, and whether you pay monthly or fortnighly. Use us mortgage calculators to guide you.

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Every state is different and may depend on the value, whether you are building or buying an established home. Read more in our FHOG article

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It is a rate that includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure that lets you compare loans from differengt lenders on a fair comparison.

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This 'in principle approval' is usually valid for 3 months. Gives you the confidence on how much you can borrow before your purchase a property.

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The cost of Stamp Duty varies between States and Territories. Subject to your personal loan circumstances, the cost of stamp duty can be included in the loan amount you borrow.

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Chinese Proverb

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