Bridging Finance

What is a Bridging Loan?

Sometimes they’re called Bridging loans, sometimes “Go-between Loans” and often “Relocation Loans”, but essentially they are all the same thing.

Bridging finance is a type of financial product which allows you to purchase a new property before selling your existing one.

Because upgrading your home or even downsizing can be a logistical nightmare, a Bridging Loan product is a solution to literally “bridge the gap”. The process involves taking out a new facility for a property purchase and during the period “in-between” when the existing property is yet to be sold, the repayments for that existing loan are deferred until the house is sold.

There are both advantages and disadvantages with this strategy depending on your unique circumstance. Our mortgage brokers will be able to guide you as to what will work well for you. There are many factors to be considered like how long it will take the existing property will sell and for how much which are usually not ascertainable at the time of application.

How does a bridging loan work?

Typically, bridging loans have interest only repayments at a set term and are calculated based off the equity held in your current property. Each lender that offers a bridging option, and only a select few do, have their own unique policy, but they usually work off the assumption that the existing property will be sold within six months and during this time the interest on the new loan is accrued.

Due to the often-complex nature of a Bridging Loan its prudent to have an experienced mortgage broker on hand to guide you through the process to alleviate the potential stress of purchasing and selling at the same time.