Bridging loans will help you decide whether to buy or sell a home first
Bridging finance is short term funding that will assist you in buying a new property while you are busy selling your current asset. A bridging loan will also provide you with the required finance to build a new home while living in your existing property. Most people have to sell their property first and then purchase a new one with the available equity. But there are some situations when you have to buy first, before selling your exiting home.
How do bridging loans work?
Suppose you have found a new house or a property while still residing inside your old home. To bridge the gap between the period of selling your old property and paying for the a new one, you will require some funds. Short term bridging loans from LoansOne will offer you a line of credit to cover this gap. You have to pay for the bridging finance in Australia and the home loans together. The borrower has to submit the evidence that they can pay the interest of the bridging loan during the selling and buying of the properties. The bridging loan is repaid at settlement of the sale of your existing property. The amount of bridging funds is dependent on the equity available for the existing home.
Different Types of Bridging Funding
There are primarily two kinds of bridging funding, and they are:
● Closed Bridging funds
The borrower can apply for this alternative when there is already a contract of sale on the existing property, and they know the fixed date when the home will get sold. You can then pay back the loan with the funds received by selling along with fees and interest rate on this current date.
● Open Bridging Funds
This option is applicable when the existing property has not yet been sold. The term for this loan is up to one year.
Advantages of Applying for bridging loans
Whether upgrading or downsizing, short term bridging loans can offer a solution to avoid any stress of selling your home first and searching for temporary accommodation while finding your new home. Let us now look at the benefits of bridging finance in Australia.
● You can have complete confidence while finding a new house but have not begun the process of selling your current residence.
● You can ignore the difficulty of renting a new space till you have found a new home or the building is still under construction.
● The best bridging loans offer the borrower the alternative of making the payments for the current funding only. You have to pay only the interest of the bridging finance till the time of expiring.
● It includes the alternative of making payments during the loan term for reducing the interest amount.
● If the equity and the property value are sufficient for the bridging funding, only the upfront costs like the legal fees and the stamp duty will get added to the loan.
How to know if Bridging Funs are perfect for you?
● Get a thorough and correct evaluation of your current asset and always remain realistic about the selling price.
● We will recommend having a minimum of 50% equity on the current property.
● Always calculate the required time for selling the property accurately. What is the real estate market where you live? Also, consider the time, the money will take to reach your account for complete settlement.
● Always make some small payments with interest rate during the bridging loan term for minimizing the overall debt and interest costs
Things to know before applying to bridging finance in Australia
● Availability and Fees
Short term bridging loans are not available for all types of home loans. There can be some charges or fees based on the loan type.
● Interest Rate
The best bridging loan of LoanOne is an interest-only funding option only for the first 12 months from the time of approval. The longer you take to sell the existing house, the longer there will be an interest rate charged on this funding.
If you cannot sell the house within the agreed time, LoansOne can negotiate an extension of the loan term until the sale of the property.
If you want to know about bridging funding, take it to our financial specialists directly.
Call us now at 1300 524 472 to learn more about our secured short-term business loans, or simply apply now to see if you qualify.