Bridging Loans
Looking to purchase a new property, but haven’t sold your current one?
A temporary, short-term loan which bridges the gap between buying your new property and the sale of your current property. A bridging loan is a common solution for property owners who are in between homes. Most bridging loan providers give you between 6 months to 2 years to sell your current home to paydown the bridging portion of the loan.
Unsure whether a bridging loan is right for you or have questions about the process? Our mortgage brokers are here to help.
How much deposit do I need for a bridging loan?
The deposit needed for a bridging loan is dependent on how much equity you have in your current property. Most lenders will require you to have a reasonable buffer in equity in your current home or a minimum 20% cash deposit in order to get approved for a bridging loan.
What are the requirements for a bridging loan?
1. The sale contract for your current property
As a requirement for approval, some banks and lenders will need to see the sale contract of your current property to confirm that it has actually been sold.
2. End debt
Lenders often require an end debt as a condition to approve bridging loans, so this is something to keep in mind.
3. Maximum end debt
If end debt is a condition, it cannot be higher than the value of our new property. If your debt ends up being over 80% of the value of your new property, you could be liable to pay Lender’s Mortgage Insurance (LMI).
4. Your home equity
When assessing your eligibility for a bridging loan, lenders will look at the equity of your current home. Generally speaking, the more equity you have, the more a lender will allow you to borrow.
What to keep in mind about bridging loans
The approval time is speedy
Bridging loans can be approved within 5 days.
It provides financial breathing space
Often, when buying and selling a house, timings don’t always align. Bridging loans give you some breathing space, allowing you to put a deposit down on a new home, before the sale of your existing home.
You can borrow a large amount
If you’ve purchased a property that is outside your borrowing capacity until you sell your existing home, bridging loans can allow you to borrow up to 100% of the price of your new property.
Do banks offer bridging loans?
Absolutely. Most banks and private lenders offer bridging loans, however these tend to be available only via mortgage brokers as opposed to being offered to the general public. The team at MortgageWorks would be happy to assist you in finding a trusted partner who can help with all your bridging loan needs.
