Bridging Home Loans
Bridging home loans help people sell one home at the same time they are buying another home. If you are selling your home and another home comes up that is just right, what do you do? One solution is a bridging loan which will simplify the transition between buying and selling properties at the same time. A bridging home loan lets you purchase and move into your new home while still waiting for a buyer for your old home.
How do Bridging Home Loans Work?
Bridging Loans work by using the equity in your existing home to grant you short term bridging finance between the time you buy your new home and sell your existing home. Your bank will assess the amount or level of the equity in your home and if it is enough they will grant you a bridging loan. This would allow you to purchase your new home while living in your existing home and after your existing home sells you repay that amount to your bank.
Bridging loans are generally offered as short term loans of around 6 months however they can be extend for up to 10 years in some cases.
Bridging loan features at a glance:
- Interest-only repayments during the bridging loan period
- Flexible repayment options so you only have to make one repayment
- Standard loan approval fees apply
- When the existing property is sold and is received by the bank your loan can revert to a normal home loan with principal and interest.
- Interest only for up to 10 years
Can Bridging Loans be used For Building a Home?
A bridging loan is an excellent way to build a new home while still being able to live in your existing home. Many people sell their existing home and then have to move into a rented home while their new home is being build. This step is unnecessary with bridging finance and you will save on extra moving costs and the extra inconvenience of moving to a rented home.
A bridging loan will allow you to live in your existing home while your builder completes your new home. Then you can move into your new home and place your old home on the market. Once your old home sells and the amount is repaid to your bank your loan can revert to a standard loan.
Bridging Loans: Catchers and Possible Risk
Bridging loans offer many advantages but there are some disadvantages that you should be aware of. Sometimes people may find it harder to sell their existing home which means a lot more interest because there are, in fact, two mortgages. Selling your existing house is market driven and thus will be effected by those market factors. You must take this into account before you commit to a bridging loan so you that the amount of interest changed does not get out of control.
To combat the problem of out of control interest some people sell their existing homes lower than market value and pay down the debt bringing their debt and interest changes under control. However if your existing home does not sell consider getting some short term tenants in to cover the interest charges while your house is still on the market.
Another catch is that not all people will be considered for a bridging loan because they do not have sufficient equity in their existing home.