Loan Types

Bridging Loan

Bridging loans have come a long way over the years. If you have your home up for sale – and you find the home of your dreams – this loan can really help you. It used to be seen an expensive option, but the Bridging loan has come a long way with a lot of enhancements.

This is how it works. The lender advances the money so you can buy your new home before your current home is sold, this is where the name 'Bridging' comes from. Depending on the equity in your current home you may be able to include the fees. The interest charged to your loan can be paid by you or capitalised. Capitalised means it gets added to the loan.

When your original property is sold, the proceeds are deposited to the new loan. The balance owing becomes your final loan amount and you start making normal repayments.

Benefits

• You can buy or build your new home before you sell your existing home
• You can avoid moving into a rental property and move directly into your new home

Pitfalls

• Interest is charged on the full amount of the new loan (opening loan)
• If you don’t sell your existing home in due course (normally 6 -12 months), the interest bill adds up
• It may force you to selling your existing home at a price lower than you wanted.