Some of you may be aware of what bridging finance is and may even have had a bridging loan, others may not know that it even exists. If you are ever wanting to buy a new home before you are able to sell your existing home, bridging finance could very well be a real solution that could ensure that you don’t miss out on your next dream home. Let’s elaborate a little further.
Bridging loans can help
In a perfect world, we would all be able to precisely match up the dates that we sell our existing home and purchase a new one. But in the real world, many of us find that next dream home that would like to move on and purchase before we are able to sell our existing one. This is where bridging loans can assist. As the name implies, it is a loan that serves as a bridge, enabling you to finance the purchase of a new property before the existing one is sold.
A short term loan covering the finance on both properties
In summary, the way that a bridging loan works, is that lenders effectively provide you with a short term loan covering the finance on both properties, once the existing property is sold, the existing loan/debt is retired and you are left with the “new” loan. Most banks in the market offer bridging loan products, however they all have varying degrees of appetite for these loans and this is reflected in their specific policies. Some lenders want to ensure that you can service and repay the loan based on the combined debt or “peak” debt position. Others are more comfortable assessing you on the “end” debt position, i.e. what is the loan amount that you will be left with once you have sold the existing home and repaid that loan.
Planning is the key
Navigating through the various aspects of bridging loans can be tricky, therefore the key message that we would like to leave you with regarding bridging loans is that, firstly there are options available to you and secondly that planning is key. We encourage anyone who is considering buying and selling to work through a bridging loan scenario so you can understand what your position is and what your options are, it really could make the different between securing your next dream home or missing out.
As always, Gareth, Paul and Murray at LogiX Financial are here to provide assistance and guidance regarding your specific situation and your bridging finance options.
- Posted by LogiX Financial
- On March 3, 2017
- 0 Comment