What is Bridging Finance?
Bridging finance is when you purchase a new property before you have sold your existing one. It is only available on Owner Occupied property.
Like anything there are some requirements that you would need to meet. Your existing property needs to be on the market; Lenders will capitalise 3-6 months of interest into the loan during the bridging period; You need to have sufficient equity in your property – equivalent to 20% deposit; Once sold the net sale proceeds will be paid towards the bridging loan. The remaining balance is referred to as the “end debt” and this is the loan you will be left with and make your normal monthly payments on.
An example may be:
New property purchase $500,000 (property value) + Purchase costs $20,000 + Existing loan $200,000 = Total amount of finance required $720,000.
The existing property sells and there are net sales proceeds of $350,000. This amount is applied to the loan and the balance is then reduced to $370,000. This is the amount that the customer will make monthly payments on.
The benefits of bridging finance is that you will not have a gap where you have sold your place and are looking for a new one. Ordinarily you may have needed to rent somewhere during this period. You only need to move once.
With the Bridging Loan calculations the banks take into consideration the purchase costs on the new property as well, which means these are financed.
Not all Banks offer these types of loans though and each Banks requirements do differ slightly.
Is this something that you are considering? Contact me to see if you qualify and what the requirements are.