If you want to buy a new home before selling the old one, how do you finance it? Among your home refinancing options, the best is to take out a bridging loan. This will give the cash injection you need to bridge this gap between selling and buying properties.
With this kind of very short-term term under such specific circumstances, bridging loans can vary widely depending on the exact conditions involved. Learn more with this guide by Mortgage Masters, and Request a Consultation today.
How a Bridging Loan Works
Bridging loans are used to service a temporary need. They are used when selling one property and buying another, to bridge the gap between having bought the next property and the sale of the former property. If the timing of the sale and purchase don’t neatly line up, the bridging loan will give you options in refinancing your home loan to meet this temporary need, so you can be comfortably settled in your new home by the time your old home is finalised in its sale.
There are two types of bridging loans, depending on your property sale circumstances. Sometimes, homeowners will be looking to buy their new property whilst the sale of their old property is still in the midst of finalising the sale. Otherwise, homeowners have a confirmed purchase of their old property, but they need the funds to buy their new property before the money comes through. As the former situation is riskier for potential lenders, this affects the parameters of the loan such as the interest rates, fees, and the type of lender who will consider the bridging loan.
The Interest Rates and Fees
Just because they are so short-term, doesn’t mean that bridging loans necessarily have to have high interest rates. While the interest rates depend on the lender and the homeowner – so they can vary widely – interest rates should still be in the single digits, and sometimes quite low.
As well as the interest rates, bridging loans can come with additional fees. This usually includes an application fee for the process of acquiring the bridging loan, an administration or legal fee, and an exit fee for when the loan closes. Make sure to take these fees into calculation when considering the total cost of the bridging loan.
The Role of Non-Bank Lenders
While it’s possible to secure bridging loans from banks, non-bank lenders offer the flexibility to service all types of homeowners. For example, some homeowners need bridging loans to buy a second property whilst the sale of the first hasn’t yet been confirmed. In these cases, banks don’t have the flexibility to be able to finance these bridging loans, as they are seen as too risky to meet their lending criteria. However, non-bank lenders do have this flexibility, and are more than capable of meeting this need in temporary lending. Request a consultation today.
Talk to a Loan Broker
To book a consultation or ask any questions you may have about your finances, give us a call on 0800 630 7171.