A bridging loan is a short-term loan that can help you buy a new home before selling your existing property.
Watch this short video to learn more about bridging finance.
A bridging loan acts as a ‘bridge’ between your old home and your new one:
Your bridging loan will then revert to a standard home loan with standard terms.
When lenders assess you for a bridging loan, they first need to understand what the size of that bridging loan would be. This is done by:
The final number is known as the ‘ongoing balance’.
Using their standard criteria, lenders then assess whether you’d be able to service the ongoing balance.
Bridging loans are generally interest-only. So during the bridging period, you’ll be charged interest on your ongoing balance but won’t have to repay any of the principal. These interest payments will be added to the mortgage on the new property when you sell your original home.
Overestimating the final sale price of your existing property, and falling short of the amount you need to pay out the bridging loan (although lenders are generally conservative in their calculations, to reduce the risk of this happening)
Accumulating a large interest bill (as the longer it takes to sell your existing home, the more interest you’ll get charged)
Having to service two loans if you can’t sell during the bridging period
Bridging loans can be a great solution to the age-old question of whether you should buy or sell first. However, they aren’t suitable for every borrower. Your Shore Financial broker can help you weigh up the pros and cons.
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We appreciate your message and a Shore Financial broker will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
