When you are looking to purchase another property before selling your current one, you may need to consider borrowing money until your current property sells. This is often referred to as bridging loans.
Bridging Finance Packages
There are three main BRIDGING FINANCE options and they are:
- Just borrow as a NORMAL LOAN and pay off debt when completed. You will need to have enough income to service the whole debt for this type of facility. Normal loan terms and rates apply. With either interest only or principal and interest loans. When calculating your borrowing power we would take into account your personal income for wages business etc plus we would access your rental income if you were stuck with two or more properties for a short period of time.
- END DEBT BRIDGING LOANS where income is used to service the debt that maybe left when current property is sold. You will need to sell with a specified time, with up to 12 months to do so. Another name for this type of loan is a relocation loan. You require a certain amount equity generally maximum of 70% of the combined property value for residential and less for commercial and rural. Each case would be different.
- NO END DEBT BRIDGING LOANS where there is no servicing test done or income required. However there are rules and buffers around the equity test, to ensure that no debt likely at after sale. Only have maximum of 9 months to sell so must be confident of selling otherwise can be risky. One the key things to consider is how saleable is my current property. Although handle the right way can be very beneficial having control over the purchase and sale to maximise the sale price. Also saves moving twice.
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Bridging Finance Option Expert advice
If you are unsure about which type of finance is most suitable for you, you should discuss your situation with one of our Bridging loan brokers.
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