If you’re looking to buy a new property while you already own one, bridging finance could be the solution you need to secure the new property whilst waiting for the previous property to sell. The prospect of selling one property whilst buying another can be daunting, given the requirements of both timelines to match up in a way that allows you to secure the new home with access to finance that may be tied up in your previous mortgage. However, if this is your situation, don’t be anxious – bridging finance may provide the answer to successfully transitioning from one property to another.
One of the services I am able to offer is assistance in applying for bridging finance. A bridging loan is generally an extension of the loan amount on a regular home loan, and can be increased to cover the purchase price or construction cost of a new property whilst the old one is on the market.
EXAMPLE – James has a property that he is selling, but he doesn’t have a buyer yet. He’s found the ideal property to move into and doesn’t want to miss the opportunity to purchase.
His existing loan is $200,000 and he’s looking at buying a new property for $500,000 including costs. He can borrow 100% of the purchase price plus costs – therefore the total loan will be $700,000, also known as the ‘Peak Debt’.
The idea is that this Peak Debt is a short term debt, just until James sells his existing home.
James finally sells his place and comes out the other end with $400,000, with which he pays down the loan, leaving him with a standard mortgage of $300,000.
Most lenders offer interest only repayments on bridging loans. The interest can be capitalised onto the loan increasing the peak debt or voluntary repayments can be made.
This allows borrowers to secure their new home sooner without the stress of servicing two full mortgage payments at once. Brokers are also well accustomed to negotiating rates with lenders that give their clients the capacity they need in order to be able to secure more competitive interest rates without needing to refinance entirely. By using their market knowledge and awareness of the full loan product range on the market, they’re able to negotiate harder on their client’s behalf. They’re well used to working to keep banks honest!
To find a bridging loan that will allow you to secure your next property whilst finalising the sales of your current home, contact me, so I work on your behalf to secure the best deal and financial solution for your needs.