Navigating the property market can be a complex journey, especially when you’re trying to buy a new home while selling your current one. Bridging finance offers a solution to this common dilemma, providing the financial support needed to bridge the gap between buying a new property and selling the old one. It’s crucial to have the right support to avoid a potential transition disaster. But before we get into the nitty gritty, let’s understand exactly what bridging finance actually is.
What is Bridging Finance?
Bridging finance, also known as bridging loans, is a short-term loan designed to cover the period between the purchase of a new property and the sale of an existing one. This type of finance is ideal for those who have found their dream home but are still in the process of selling their current property. It ensures that you don’t miss out on the perfect new home due to timing issues with your property transactions.
Bridging Loans Explained
Bridging loans work by allowing you to purchase a new property before your existing one is sold. Here’s a step-by-step breakdown of how it typically works:
- Application: When you apply for a bridging loan with a lender like Glass Financial, you will need to provide details about your current mortgage and the property you wish to purchase. The lender will assess your financial situation and the value of both properties to determine your eligibility for a bridging loan.
- Approval: Once your application is approved, the lender will offer you a loan amount based on the equity in your current property and the value of the new property. The loan amount is usually up to 80% of the combined value of both properties.
- Purchase: With the loan approved, you can proceed to purchase your new home. The funds from the bridging loan will be used to cover the deposit and other associated costs of the new property.
- Repayment: After your existing property is sold, the proceeds from the sale will be used to repay the bridging loan. Any remaining funds can then go towards reducing your mortgage on the new property. It is important to note that during the bridging period, you may be required to make interest-only repayments on the bridging loan.
Note: Peak Debt & End Debt: When it comes to bridging finance, lenders will consider both the peak debt and the end debt. The rates and costs can vary depending on your personal circumstances as will the lender outcomes and appetite.
But don’t worry, the team at Glass Financial will guide you through the maze to make a clear and confident decision that’s best for you.
Bridging Loans Interest Rate Considerations
While bridging finance can be incredibly useful, it’s essential to consider the following:
- Higher Interest Rates: Bridging loans often come with higher interest rates compared to standard home loans. It’s important to factor in these costs when considering a bridging loan.
- Short-Term Nature: These loans are meant to be short-term solutions, typically lasting between six to twelve months. Ensure you have a clear plan for selling your existing property within this timeframe.
- Additional Costs: Be aware of additional costs such as valuation fees, legal fees, and loan establishment fees. These costs can add up and should be considered when assessing the overall affordability of a bridging loan.
Is Bridging Finance Right for You?
Bridging finance can be an excellent option for those looking to move seamlessly from one property to another. However, it’s crucial to assess your financial situation and consult with a financial expert to determine if this is the best solution for you.
At Glass Financial, we specialize in helping clients navigate the complexities of bridging finance. Our team of experts can guide you through the process, ensuring you make an informed decision that suits your needs. We ensure the correct solution is selected and applied to avoid an all too often terrible outcome by assessing your personal situation carefully.
Get in Touch with Glass Financial
If you’re considering bridging finance, contact Glass Financial today. Our experienced team can provide personalized advice and tailored solutions to help you achieve your property goals. Give us a call today on 1300 245 277 or send us an email to info@glassfg.com.au
