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Bridging Loan Benefits

Bridging Loan Benefits

Bridging Loan BenefitsThe time between buying a new property and waiting for your existing property to be sold can be an excruciating one if you do not have the correct financing finalised. If you need financing as you wait for your home to sell, a specific type of loan – the bridging loan – is the financial product that can solve your problems.

Access finance to buy quickly

One of the central benefits of a bridging loan is that it gives home-buyers an opportunity to buy quickly before selling their existing home. In an ideal world homeowners would be able to sell their houses as soon as they find their dream home, however this perfect scenario may only apply to a small number of homeowners. Bridging finance makes the gap period before finding your new home and selling your old one easier to manage.

This type of finance is usually approve quickly so that borrowers can bypass the time-consuming procedures required by banks and other traditional lenders.

Rather than losing your dream house to another buyer who has finance, you can quickly purchase the property and move in before you find the right buyer for you old home.

No principal repayments

Another major benefit of bridging loans is that you make only interest repayments until your existing property is sold. Once a buyer has been found for your former home, you can repay the loan in full.

Leverage equity

The bridging loan essentially makes use of the built-up equity in the home to finance the purchase of the new home. Lenders are usually able to lend up to 65% to 75% of the equity held in the property.

Flexible lending criteria

Bridging loans usually come with relatively relaxed lending criteria, making them easier to obtain in a short amount of time. Once a buyer has been found, the loan can be paid off and settled fairly quickly.

More time to sell

A short-term financing product, bridging loans can last up to 12 months (sometimes more), which gives you more time to sell your former house. Rather than rushing to find a buyer, you can take time to sources buyers and sell your home at the right price.

Flexibility in options

There are two main types of bridging loans: one that covers existing mortgage debt and the price of the new home, and one that cover only the new home. The former uses both your existing home and your new property as security. Once you sell your old house, you use that to repay your loan and transfer the outstanding amount into a new mortgage

The latter requires buyers to make repayments on both loans until the old house is sold. Once the property is sold, the buyer can use it to pay off the first mortgage and some of the second mortgage.

Depending on the circumstances, the former or latter may be more suitable for your requirements.