Found your dream home in Perth? Haven’t sold your last one yet?
Don’t worry, you can still pick it up before anyone else!
Our expert mortgage brokers can help you get into your new home with the perfect bridging loan for your financial situation. This kind of mortgage enables you to finance your new home while you wait for your existing home to sell. They can provide a short term solution to your cash flow difficulties during the purchase of a new property.
So how do they work?
A bridge loan is calculated by adding the value of your new home to the outstanding mortgage of your existing home, then subtracting the expected sale price of the home. The amount left over becomes your ongoing balance. It represents the principal of your bridging loan. This mortgage is interest only during the bridging period. Interest will be compounded monthly at the standard variable rate and then added to the ongoing balance when you sell your house. This amount will then become the amount of the mortgage on your new property.
So when might you need a bridging loan?
Perhaps you are buying a house at an auction, or you discover the perfect central Perth apartment you’ve always wanted – but you haven’t sold your current home. If you don’t want the opportunity to pass you by, a bridge loan might be perfect for you. They can also be used if you are building a new home and wish to stay in your current one until construction is complete.
Businesses may also find the need to use a bridging loan. One situation where this might be necessary is if a partner decides to leave the business and the remaining partners need to quickly find the finance to cover their share until more capital can be raised.
This type of finance carries a greater risk than conventional loans. This is because there is an increased risk to the lender because the house may not sell during the bridging period or the business might have problems with cash flow. The longer a bridging loan runs for, the more interest it accumulates and the larger the debt becomes. If the debt becomes too big to be serviced by the borrower, this may lead to the bank foreclosing on the property. Due to this greater risk, bridge loans tend to have a higher interest rate than those of variable and fixed rate mortgages.
There may also be extra charges such as establishment fees, stamp duty and valuation fees, which will need to be taken into consideration when thinking about obtaining bridging finance. Most bridge loans are typically six to twelve months. They can be especially helpful because they can be used to avoid taking out another mortgage, have interest-only repayments and generally help the sale process to run much more smoothly. Disadvantages of bridging loans include the difficulties of trying to predict the sale price of your current home and how long it may take to sell.
So is a bridging loan the right solution for you?
Don’t worry if you’re confused about the whole process, Mortgage Hero will help by simplifying everything for you. We’ll explain the complicated details, find the right lender for you, negotiate interest rates and help with the application process. One of our reliable Perth mortgage brokers will take the stress out of the situation and help you get the best deal, so that you can be in your dream home sooner.