Property bridging finance Glen Ashley
We at Bayside Finance Solutions don’t expect you to know everything about property bridge financing, so don’t panic if you’re confused with which route to take as we are here to make it easier for you and we service clients in Glen Ashley.
If you’re looking for a short term loan that provides immediate funds until you can find a more permanent financing option, a bridge loan may be the best option for you.
What is property bridging finance?
A bridge loan is a short-term loan used to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a good price. When a borrower expects to sell a property quickly or refinance in the near future, a bridge loan which is short-term financing, can facilitate the financing of a property for a short period of time. The “bridge” buys the borrower sufficient time to arrange traditional long-term financing, re-position a property for re-sale or close the deal on the sale of another piece of property. A bridge loan is typically paid back when the collateral for the loan is sold or refinanced with a traditional lender.
Accessing bridging finance can take a couple of weeks, compared to a mortgage from a bank which could take several months.
In case your existing Glen Asley home takes too long to sell, and to help reduce your total loan amount, it is important to continue making repayments so you’re not left with a large lump sum to pay back.
How does property bridging finance work?
A bridging loan is calculated by adding any debt owing on your existing Glen Ashley home to the value of your new home, and then subtracting the potential sales price of your existing home.
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
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.
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 Glen Ashley 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 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 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 Glen Ashley 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?