What is bridge financing?
Bridge financing, commonly referred to as a bridging loan, is a transient financial arrangement aimed at furnishing prompt access to capital to “bridge the financial gap” between acquiring a new property and selling an existing one. This financing proves advantageous in time-sensitive situations, enabling investors to capitalise on opportunities without selling their current assets.
Key features of bridge financing
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- Short-term duration: Typically ranges from 6 to 12 months, with some Funding loans extending up to 36 months.
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- Quick approval and disbursement: Designed for speed, with settlement possible within three business days and funds disbursed soon after.
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- Flexible use: For residential, commercial or investment properties.
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- Interest-only payments: Option to make interest-only payments during the loan term, reducing the immediate financial burden.
How does bridge financing work?
Understanding the mechanics of bridge financing can empower property investors to make well-informed decisions and optimise their investment portfolios.
Step 1: Application
First, investors should apply for a bridging loan through a trusted lender such as Funding. They must provide information about their existing property, the prospective new property, and financial standing. This may involve providing documentation such as proof of income, property specifics, and mortgage details.
Step 2: Approval
Upon application submission, the lender undertakes a thorough review. The lender evaluates the investor’s eligibility by analysing factors including credit history, property value, and the purchase price of the new property.
Step 3: Disbursement
After receiving approval, the funds may be disbursed rapidly, enabling the investor to acquire the new property. The loan amount will typically encompass the purchase price and related expenses.
Step 4: Transition
Upon receiving the funds, the investor can acquire the new property and commence any essential renovations or preparations for resale. Throughout this period, they can make interest-only payments to alleviate financial pressure. Once the current property is sold, the resulting proceeds are utilised to settle the bridging loan.
Benefits of bridge financing for Australian property investors
Bridge financing offers several advantages that make it an attractive option for property investors:
Immediate access to funds
Bridge financing provides quick access to the necessary funds to secure new properties, allowing investors to act swiftly in competitive markets. This immediate liquidity is crucial for seizing profitable opportunities without delay.
Financial flexibility
The flexibility of bridge financing enables investors to manage their cash flow effectively, finance renovations, and cover holding costs until their existing property sells— so investors can focus on adding value to their properties without financial strain.
Reduced stress
Managing multiple property transactions can be stressful. Bridge financing alleviates this stress by providing the funds needed to bridge financial gaps, ensuring smooth transitions and timely project completion.
Maximising returns
By leveraging bridge financing, investors can take advantage of time-sensitive opportunities, complete renovations quickly, and sell properties at optimal market conditions, maximising their returns on investment.
Get started
Bridge financing offers investors the agility, swiftness, and financial backing required to capitalise on investment opportunities and streamline property transactions. For investors seeking to manoeuvre the intricacies of property finance and secure their next investment, bridge financing from Funding can be instrumental in accomplishing their objectives.
Learn more
For additional resources and information on bridge financing and property investment strategies, explore these helpful links:
