Property bridging finance Durban
If you’re looking to purchase a new home in Durban but your existing home still hasn’t found a buyer, you may need bridging finance. Bridging finance helps you fund the purchase of your new property before your existing home has been sold, which means you don’t miss out on buying the home you have your mind set on just because you have to wait until you’ve sold your existing home.
Bridging finance is becoming a more popular source of finance for those looking to raise money for a Durban property purchase under a tight deadline, we at Bayside Finance Solutions can provide the solution you are looking for.
What is property bridging?
Bridging finance is a type of interim loan that allows property owners, developers and investors to access money quickly to cover both existing property and the new property you’re looking to purchase. Repayments on your bridging loan are usually calculated on an interest only basis during the time it takes to buy your new home and sell your existing home – called the bridging period.
At Bayside Finance Solutions in Durban we will consider loaning to people even if their credit score is less than perfect, since property is being used as collateral and leveraging its value in order to bridge a short period of time and borrow short term finance.
Accessing bridging finance can be accessible in around 2 to 4 weeks, compared to a mortgage from a bank which could take several months.
In case your existing home takes longer than expected to sell, and to help reduce your total loan amount, it is prudent to continue making repayments so you’re not left with a hefty lump sum to pay back. Bridging finance can be a tricky form of finance, so it’s worth getting advice from a someone who knows their business when it comes to mortgage to ensure you understand all of our loan requirements.
How does property bridging finance work?
Bridging finance is always secured against a property
A bridging loan is calculated by adding any debt owing on your existing Durban home to the value of your new home, and then subtracting the potential sales price of your existing home.
The amount leftover is called the principal and in most cases during the bridging period you’re only required to pay back the interest calculated on the principal. Interest will be compounded monthly though at the standard variable rate and added to your principal or ongoing balance. This amount will become your mortgage on your new property once your existing home has sold.
Before considering a bridging loan, it’s recommended you have at least 50% of your existing home’s value in equity, in order to avoid paying a sizeable amount of interest. And bear in mind that during the bridging period, you’re essentially paying off the interest on two properties, so selling your existing home is a priority
What are the benefits of bridging finance for your home?
Bridging finance takes away the pressure of having to match up settlement dates, letting you sell your house without worrying about losing it entirely. It is the best way of buying the home you want immediately without having to wait, letting you secure a new property without having to spend days or weeks worrying about selling your existing house first. It is also an ideal option for finance if you’re considering building a new home in Durban while you live in your current home.
A mortgage really isn’t an option, as this can take weeks, and getting a definite buyer for your current property may take time. This is one of the most common reasons why Bayside Finance Solutions has more and more clients wanting advice and a property bridging solution, as it helps to ‘bridge’ the gap between selling and completion, enabling you to obtain your dream home.
What are the risks of bridging finance?
We make our Durban customers aware that this is a slightly more expensive source of finance compared to a traditional bank mortgage and you could run the risk of your property being repossessed if you cannot keep up with repayments in the long-term. The biggest risk with bridging finance is overestimating how much you are going to sell your existing home for. If your home sells for less than what you anticipated, your bridging loan may not be enough to cover the cost of your new home and you could run the risk of ending up with a far bigger debt to repay.
If your existing home takes longer to sell or the sale falls through, you could find yourself dealing with a larger debt. The lender could also increase the interest rate on your mortgage if your existing property doesn’t sell within the allotted bridging period. finance takes away the pressure of having to match up settlement dates, letting you sell your house without worrying about losing it entirely. It is the best way of buying the home you want immediately without having to wait, letting you secure a new property without having to spend days or weeks worrying about selling your existing house first. It is also an ideal option for finance if you’re considering building a new home in Durban while you live in your current home.
What to consider?
Get advice about bridging finance before making any decisions. There are quite a few factors to consider when deciding on whether or not bridging finance is the right option for your particular situation:
- What period of time do you need the funds for?
- What is the average time properties are taking to sell in your area?
- How soon can you get your existing home ready for sale?
- Are you building a new house or buying an existing property?
- Will you be able to meet the repayments on your current loan and your bridging loan?