Ready to build or buy now, but haven’t yet sold your old property? Bridging finance could be the answer to keep the ball rolling.
Trying to sell one property and buy another can be quite a daunting and emotional process, especially when the timelines of both projects don't match up perfectly.
A bridging loan is usually just an extension of the loan amount on a regular home loan, and it can cover the purchase price or construction costs of a new property while your old one is selling.
Most lenders offer a period of interest-only repayments on bridging loans, allowing borrowers to get into their new home sooner without having to start paying off a full mortgage before selling the old one.
Bridging loan is usually used for a short period of time, from 6 to 12 months. The lender will lend you up to 80% of total value of the old and new properties and allow you to settle the new property without selling the old property.
You are required to sell the old property before the bridging loan is expired and repay the loan down to 80% of value of the new property. The remaining loan will then change to a normal home loan.
Bridging loan is sometimes more expensive than regular loans, and you also need to service mortgages for both new and old properties during this period of time. So talk to your lending manager to make sure you fully understand the implication and have financial arrangement for this.
