Bridging Loans: What They Are and How They Can ‘Bridge the Gap’ Between Buying and Selling Property

Recently updated on January 10th, 2023 at 06:08 pm

Property transactions can be unpredictable, and there’s often a ‘mismatch’ between finding your new home and selling your current place. This is where a short-term property loan, such as a bridging loan, can be a lifesaver. Good news: there are also a variety of lenders that supply bridging loans to help acquire your ideal property.

What is a bridging loan and how can it help during a financial shortfall?

A bridging loan ‘bridges the gap’ by providing immediate cash flow during a financial shortfall (usually a temporary situation where a financial obligation is much more than your available cash). It allows you to secure real estate properties as fast as possible.

Bridging loan in real estate: common uses

Bridging loans can be used for a variety of purposes. Common uses include:

A downpayment for a new property
Closing costs for the existing property
Stamp duty
Renovations to help increase the house’s sale value
Business capital
Refinancing
Property auctions.

Home bridging loan interest rates

Bridging loan interest rates will vary from lender to lender, as will their lending criteria, fees, term and application process. Private lenders, specialist lenders, non-bank lenders and fintechs usually are more flexible with credit history (meaning they’ll often approve borrowers that have limited credit history).

Is a bridging loan a good idea?

Getting a loan of any type is a big decision. It’s wise to speak with a mortgage broker, preferably in conjunction with your accountant, to ensure you’re obtaining the most suitable loan for your requirements.

How much can you borrow and how can you apply for a bridging loan?

Again, the amount you can borrow will vary from lender to lender. The amount will also be affected by factors, including your:

Debt-to-income ratio (DTI)
Assets
Sources of income
Exit strategy (ability to repay the loan)
Credit score/ credit history.

An online application is increasingly preferred as it’s quick and convenient. Many lenders provide the option to apply for caveat loans online – particularly private lenders, specialist lenders, non-bank lenders and fintechs. Need $25,000 – $500,000+ within days? Click here to apply for a short-term bridging loan.

Is there an alternative to a bridging loan?

There are many different types of loans available. Two common alternatives include:

Home equity loans: this loan type taps into your home equity (your house’s market value minus its mortgage) to provide finance.
Personal loan: A personal loan provides finance that needs to be repaid with interest over a fixed term. Personal loans are often unsecured (meaning it relies on the borrower’s creditworthiness vs assets).

Again, your mortgage broker is best placed to ensure you’re obtaining the most suitable loan for your requirements.

Key takeaway

A bridging loan can help you get out of a financial shortfall when dealing with real estate transactions. It can be used for a variety of purposes, including renovations to help increase the house’s sale value. Aside from short-term bridging loans, we also offer caveat loans, first mortgage loans, second mortgage loans and home equity loans.

Since 2001, Mango Credit has helped thousands of Australians get out of a bind and explore great opportunities through short-term financing solutions. We have a team of qualified, licensed and experienced lending experts that specialise in credit, mortgage and fund management that provide tailored lending solutions to each client.

Mango Credit

Yanis Derums is the Founder and Director of Mango Credit– a leading private lender specialising in bridging loans for personal use and business short term loans for commercial and/ or investment purposes. Yanis has extensive experience with financial analysis, credit assessment, product structuring, and general business management