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Bridging Home Loan
No matter how organised you are, sometimes circumstances prevent you from selling one property before purchasing another. Even if you do sell first, timing settlement on two properties can be tricky.
In these circumstances bridging finance can be particularly useful. Bridging finance is a service offered by lenders to help solve the problem of coordinating settlement on one property with the purchase of another. When considering buying a new home, it is a valuable safety net for eligible borrowers.
How it works
With a bridging loan, your lender will loan you the money to cover the gap between settlement and purchase. Effectively, the lender agrees to take on both mortgages. Bridging finance typically covers a period from a few days to a few months.
To qualify for bridging finance, borrowers must show that they can pay their existing mortgage as well as interest costs on the new loan. Lenders may also charge exit fees from existing loans, establishment charges for the new loan, valuation fees, legal fees and penalties if you exit a fixed loan.
Lenders generally apply strict criteria to bridging finance before giving approval. Conditions can include the unconditional sale of a borrower’s existing property and restrictions on proposed settlement terms. Other conditions may be imposed on a case-by-case basis.
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