What is a bridging loan?
A bridging loan is a short-term financing option designed to provide immediate funds for purchasing a new property before your current property is sold. These loans cover the financial gap, or “bridge,” between buying and selling properties.
Key features of bridging loans
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- Short-term duration: Usually ranging from 1 to 24 months.
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- Quick approval: Faster processing times compared to traditional mortgages.
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- Flexible use: Applicable for residential, commercial, or investment properties.
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- Repayment: Repaid in full after the existing property is sold.
Benefits of bridging loans for smart property owners and buyers
Bridging loans offer several advantages that make them an attractive option for smart property owners and buyers:
Seamless property transactions: One of the main benefits of bridging loans is that they allow for a seamless transition between properties. You can secure your new home without having to wait for the sale of your current one, ensuring you don’t miss out on your dream property.
Financial flexibility: Bridging loans provide the financial flexibility needed to make a competitive offer on a new property. This is particularly important in a hot real estate market where desirable properties can sell quickly.
Reduced stress: The process of buying one property and selling another can be incredibly stressful. Bridging loans alleviate this stress by eliminating the need to synchronise the sale and purchase dates. You can take your time to find the right buyer for your current home while already settled in your new one.
Opportunity for renovations: Bridging loans may also be used to fund renovations on either the new or existing property, increasing its market value and appeal to potential buyers. This can be particularly beneficial for those looking to maximise the sale price of their current home.
Avoidance of temporary housing: Without a bridging loan, you might have to move into temporary housing between selling your current home and buying a new one. This can be inconvenient and costly. Bridging loans allow you to avoid this by moving directly into your new property.
How bridging loans work
Understanding how bridging loans work is crucial to maximising this financial tool. Here’s a step-by-step overview:
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- Application: The first step is to apply for a bridging loan through a reputable lender like Funding. You’ll need to provide details about your current property, the property you intend to purchase, and your financial situation.
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- Approval: Once your application is submitted, the lender will assess your eligibility based on factors such as your credit history, the value of your current property, and the purchase price of the new property. Bridging loans typically have faster approval times compared to traditional mortgages.
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- Disbursement: Upon approval, funds get disbursed, allowing you to proceed with the purchase of your new property. The loan amount usually covers the purchase price of the new property and any associated costs.
- Transition: You can now move into your new home and take the necessary time to sell your current property. The proceeds from selling your existing home are then used to repay the bridging loan.
Get started
For savvy property owners and buyers, bridging loans provide a practical and effective solution to the challenge of purchasing a new property before selling an existing one. By offering immediate access to funds and alleviating the stress associated with synchronising property transactions, bridging loans ensure a smoother and more manageable transition. If you are thinking about buying a new property and need to secure it before selling your current one, bridging loans from Funding can help you achieve your goals.
Explore our Learning Centre to learn more about how bridging loans can support your property transition. For more information, visit Funding’s Bridging Loans page.
Learn more
For additional resources and information on bridging loans and property transactions, explore these helpful links:
Grow your money by leveraging your current property
Tips for managing property transitions
How to avoid paying a double mortgage when buying a new home
