If you are in the market for a new property and have been to a home open recently you will relate with fact that it is a very competitive landscape. Home opens are bustling with potential buyers and in most cases sellers are being presented with multiple offers just days after hitting the market giving them the ability to chose not only the best price presented but the best sale terms to coincide with that. This is leading to faster property turnover and making it difficult for those needing to purchase “subject to sale” to purchase a new one. It is in this case that a bridging loan should be considered.
What is a bridging loan?
A bridging loan is a short-term home loan facility that helps you purchase your next home prior to selling your existing home.
How does bridging finance work?
Your current home loan lender or new home loan lender will review the value of your existing home to establish whether you have enough equity to purchase the next property and own both properties at the same time, but only for a short time.
Can I get bridging finance?
This depends on a few different factors and these factors are determined by your personal financial position.
So where do I start?
1. Review the value of your current home
In order to be successful in your bridging home loan application, you must first have enough equity to help you hold the existing property and purchase the new property.
We have many lenders we can talk to about bridging home loans. Each lender has their own policy on how they review this.
We recommended seeking advice from a Real Estate Agent who can determine the selling price of the home.
Your Launch Finance broker will review lender valuations and the bank will lend against a valuer’s report.
2. Consider your financial situation.
One of the most important things to consider when requesting bridging finance is your financial situation. Make sure you have a good understanding of your income and monthly expenses so you can decide if this type of loan is right for you.
3. Review lender policy to determine your new outgoings
This is where your Launch Finance broker will review different lenders to determine which lenders match your personal requirements and objectives.
There are two types of home loan applications in this area. The first is a person who can afford both properties at the same time. They don’t have constraints in meeting the commitment of the existing and new loan.
The second person cannot afford to hold both properties at the same time on normal lending policy. In this case the bank will determine the course of action and you could be in a position where you can make repayments on both properties. The lender will also review the available equity to allow the capitalisation of interest.
Conclusion
Bridging Finance isn’t for everyone. With all lending and in particular these types of home loans each personal situation is evaluated. Each household has different expenses and different property values. A bridging loan can be a great solution for many and the with the current property market moving so quickly, people may have the equity in their current property which would enable them to move into a new property with a smoother transition.
This type of lending is just another home loan option, we can help you review the option and you can determine if it is right for you.
Need more details?
For further details feel free to get in contact and we can start reviewing together.
Speak to one of our brokers today on (08) 9367 4222 or email [email protected] and our award-winning team can help you work towards purchasing your investment property.