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Bridging Finance... What is it? How does it work?

With the market as crazy as it is you need to be sure that you can secure your next property when you sell yours, for a lot of people this can lead to uncertainty around the buying power for the next property or around making the timeline work... with the worst case scenario seeing people having sold their houses and not being able to find something suitable to move to or making the wrong choice about their next house..

This is where Bridging Finance comes in. 

Bridging finance essentially lets you purchase your next property before you have sold your current property. The obvious benefit here is that you get to go and find the right property for you, without any time pressure, the risk being that you don't have a guaranteed sale on your property although for some people it may just be an issue of timing.

There are some specialist bridging products but these can be expensive so we've got a number of tools to enable you to control the process of the move to your next property without it costing you an arm and a leg.

The simplest fix is that if you have good equity you can buy the new property and set both your existing and new lending to interest only. With interest rates being so low at the moment this will mean the cost of carrying two home loans should be manageable in most cases. 

You may choose to rent one of your properties for the short or medium term to smooth out the transition. We can work with you to find the right loan structure to fit your situation. 

It's most important here that we create flexibility for your situation and avoid costly fees of breaking loans where possible.

As an example if you owned an existing property worth $350K with a loan of $180K and you wanted to buy a new house for $500K you could just use your equity from your current home to buy the new property with no deposit.

You would then have total lending of $680K which if you fixed for 12 months and paid interest only it would cost you just $550/wk on today's rates. This means that you could either rent one of the properties or simply cover the cost of the overall home loan until you sold your existing property.

You could then reduce your home loan once your existing property is sold. The best of both worlds!

Another option, depending on your personal situation, may be to work in a repayment holiday for a small term to allow you the flexibility to sell without having to make the extra mortgage payments for a few months. 

Once again, working out the right balance for your specific situation is key to doing this right.

If you'd like to upgrade to a new property and you'd like some advice on making the home loan process as simple as possible then contact us today!

Adam and the team at My Mortgage


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