Bridging Loans: Flexible Finance Within Your Reach
Recently updated on January 16th, 2023 at 03:01 pm
Financing your next property purchase is often a daunting task. If you are not quite ready to provide the entire sum required for a down payment, a bridging loan could be just what you need. These flexible loans can help bridge the gap between your current finances and the cost of your new property. In addition, they are usually easy to avail via many different types of lenders, including non-bank, private and specialist lenders.
Keep reading to learn more about bridging loans and how this type of financing may work for you.
What is a bridging loan?
Bridging loans are a type of short-term finance that can be used to ‘bridge the gap’ between your current finances and the cost of a new purchase. For example, if you are selling your current home but have already found a new home, you can use a bridging loan to cover the costs of a deposit on a new property.
Lenders typically give you up to 12 months to repay bridging loans, although longer terms may be available from some lenders. They usually come with higher interest rates than other types of finance, such as traditional mortgages.
How can bridging loans help you?
Here are just a few examples of scenarios when a bridging loan may be useful:
Buying a new property
When you are buying a new property, you will need to pay the deposit for your new home. If you are still waiting for the proceeds of the sale of your current home, a bridging loan could be used to cover the costs of a deposit on a new property.
Renovations and repairs can increase your property value. If you plan to sell your current home soon, bridging loans can also be used to finance your home improvements.
In need of quick cash
If you need to quickly access cash for any other reason, such as to consolidate debt or pay for unexpected expenses, a bridging loan could be worth considering.
Benefits of taking out a bridging loan
A short-term bridging loan is increasingly preferred by Australian borrowers due to its:
Bridging loans can provide you with fast and easy access to cash when you need it.
Bridging loans are typically available at competitive interest rates. Likewise, many lenders do not charge early repayment fees if you want to pay off your loan early.
You can choose from a range of repayment terms to suit your needs.
Tips for choosing the right bridging loan for you
When choosing a bridging loan, it’s wise to:
- Compare interest rates and fees from different lenders
- Use a finance broker to find the best deal
- Be aware that lenders require various levels of security for the loan, such as your home or another property.
- Make sure you have a clear exit strategy in place (meaning knowing how and when you will repay the loan)
FAQs about bridging loans
Here are some commonly asked questions about bridging loans:
Q: How much can I borrow with a bridging loan?
A: The amount you can borrow will depend on the lender and the equity you have. Some borrowers might only need $10,000, though others may require over $1M.
Q: How long does it take to get a bridging loan?
A: The application process for a bridging loan is usually quicker than other types of finance, such as a traditional mortgage. Once approved, you could have the funds in your account within days.
Q: What are the interest rates on a bridging loan?
A: Interest rates on bridging loans are typically higher than other types of finance, such as traditional mortgages. Again, it depends on your lender’s requirements and your circumstances.
Q: What is an exit strategy?
A: An exit strategy is a plan for how and when you will repay the loan. It’s necessary to have one before taking out a bridging loan (or any type of loan).
If you need financial assistance for a short-term period, then a bridging loan could be worthwhile considering. Bridging loans are designed to provide flexible funding for those who may not be able to secure traditional forms of finance, and can often be arranged quickly and easily.
At Mango Mortgages, we understand that unexpected costs can arise at any time, which is why we offer bridging loans to suit your individual needs. Whether you are looking to consolidate debt, finance a home purchase or refurbishment, we can help. You can apply online here.
Our bridging loan products come with several benefits, including:
- Competitive interest rates
- Flexible repayment terms
- No early repayment fees
- Fast and easy application process
If you have any questions about bridging loans or would like to know more about how we can help you, get in touch with us today.