Is Buying a New Home Possible With a Bridging Loan?
Recently updated on January 10th, 2023 at 05:19 pm
If you’re planning to buy a new home before selling your old one, it may be worthwhile considering using a bridging loan. But what is a bridging loan?
A bridging loan is a type of short-term financing that can help you bridge the gap between selling your old home and purchasing your new home. Essentially, it allows you to borrow against the equity in your old home to help fund the down payment on your new home.
Bridging loans can be ideal if you don’t want to wait to sell your old home before buying a new one. They can also be a good option if you’re unable to get traditional finance for your new home purchase.
If you’re considering using a bridging loan to finance your new home purchase, here’s some things you should understand about how it works.
Things you need to know about bridging loans
Bridging loans are short-term loans, usually with terms of six months to one year. They are repaid when the old home is sold, and the proceeds are used to pay off the loan.
Bridging loans may be principal and interest, interest-only. Principal and interest require monthly principal and interest payments throughout the loan. Conversely, interest-only loans require monthly interest-only payments during the term of the loan.
Short-term bridging loans typically have higher interest rates than traditional home loans. The interest rate will depend on several factors, including the lender, the borrower’s creditworthiness and the value of the collateral (the old home).
Bridging loans can be a useful alternative for borrowers looking to buy a new home before selling their old one. As always, before continuing with application, consider speaking with a financial advisor or mortgage broker to learn whether a bridging loan is right for you.
Is it difficult to get a bridging loan?
It is possible to get a bridging loan – with an impaired credit history or bad credit. However, keep in mind that lenders will want to see that you have a solid plan, otherwise known as ‘ exit strategy,’ on how the loan will be repaid.
What are the eligibility criteria for a bridging loan?
Typically, lenders require that you have adequate equity in your property, a stable credit history and a steady income to qualify for a bridging loan. Each lender has different criteria, so it’s important to check out the requirements first before applying.
How much can you borrow with a bridging loan?
The amount you can borrow with a bridging loan will depend on the value of your property and the equity you have in it. At Mango Mortgages, we offer $25,0000 – $500,000+.
What are the fees associated with a bridging loan?
Again, the fees associated with bridging loans vary from lender to lender. Common fees for bridging loans include an application fee, appraisal fee and loan origination fee. Some lenders may also charge early repayment fees if you pay off your loan before the end of the term. So, make sure to compare the total cost of the loan before applying.
How long does it take for bridging finance to be approved?
Bridging finance can be approved in as little as 24 hours, although it typically takes a few days for the loan to be processed. That said, the length of time it takes to get approved for bridging finance varies from lender to lender, and will also depend on the type of loan you apply for and how quickly you can produce the required supporting documentation.
What are the alternatives to a bridging loan?
There are many different types of finance to consider. One alternative is a home equity loan. With a home equity loan, you can borrow against the equity in your old home to finance the purchase of your new one.
Key takeaway
Bridging loans can be worthwhile considering if you are looking to buy a new home before selling your old one. They bridge to fill the gap in your financial needs.
If you need immediate funds to be able to buy a new home, Mango Mortgages offers quick and easy bridging loans. With our easy process, funding is usually given within 3 to 5 days from application. You can apply online here.
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