Top Features of Bridging Loans: Why They’re Ideal for Short-Term Financing
If you’re looking for short-term financing options in Australia, bridging loans could be an excellent choice. These loans are designed to ‘bridge the gap’ between buying a new property and selling an existing one.
Bridging loans are typically secured against the borrower’s existing property and are used to cover the cost of the new property until long-term financing is obtained. They can also be used for other short-term purposes, such as renovations, property development and business financing.
Here are some top features of bridging loans that make them a smart choice for short-term financing:
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Fast approval and funding
One of the most significant advantages of bridging loans is that they can be approved and funded quickly. Unlike traditional loans that may take weeks or even months to process, bridging loans can often be approved and funded within a few days, making them an ideal choice for urgent financing needs.
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Flexible repayment terms
Bridging loans offer flexible repayment terms, which means you can tailor the loan to suit your needs. You can choose to make interest-only payments during the term of the loan, which can help keep your monthly expenses low. Or, you can opt for principal and interest repayments, which will help you pay down the loan faster.
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No early repayment fees
Another advantage of bridging loans is that there are no early repayment fees. This means that if you sell your existing property sooner than expected, you can pay off the loan without any additional fees or penalties. This can save you money and provide you with more financial flexibility.
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Access to large amounts of funding
Bridging loans can provide you with access to large amounts of funding, which can be useful for financing large purchases or projects. The amount you can borrow will depend on the value of your existing property and the property you’re looking to purchase. However, in some cases, you may be able to borrow up to 80% of the total value of both properties.
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Simple application process
Applying for a bridging loan is a straightforward process. You’ll need to provide information about your existing property, the property you’re looking to purchase and your financial situation. Once you’ve submitted your application, the lender will review it and provide you with a decision.
Eligibility requirements for a bridging loan
To be eligible for a bridging loan, you will generally need to meet certain criteria set by the lender. Here are some common eligibility requirements to keep in mind:
- Equity in your existing property
As bridging loans are secured against your existing property, you will need to have equity in it. This means that the value of the property should be greater than the amount you owe on any mortgages or loans secured against it.
- A clear exit strategy
Lenders will want to see a clear strategy for repaying the loan, usually through the sale of your existing property or another source of funds. They may ask to see evidence of your marketing efforts or a contract of sale for your existing property.
- Income
While bridging loans are primarily secured against your existing property, lenders may also consider your income when evaluating your application. They will want to see that you have a stable source of income to support the loan repayments.
- Credit score
Your credit score is an important factor in determining your eligibility for a bridging loan. Typically, lenders will look at your credit report to assess your creditworthiness and ability to repay the loan.
- Property type
Lenders may have restrictions on the types of properties that are eligible for bridging loans. For example, they may require that the property is located in a certain area or is of a certain type or age.
Eligibility requirements can vary between lenders. Before applying for a bridging loan, be sure to research the specific requirements of the lender you are considering and make sure that you meet their criteria. If you’re unsure about your eligibility, consider speaking to a financial advisor or mortgage broker for guidance.
How to apply for a bridging loan
At Mango Mortgages, applying for a bridging loan is a stress-free experience. You can easily make an enquiry via phone, email or our online platform. Once we receive your enquiry or application, we will promptly send you an indicative quote via email, which includes interest rates, costs, loan structure and document requirements.
If you are satisfied with the proposal, we will provide you with a comprehensive letter of offer. To proceed, you will need to sign the proposal and submit all the necessary documents. We will then request our solicitors to prepare the security documents or order a valuation, if required.
Once we receive the security documents, we will electronically transfer the loan funds, and the loan will be settled. To apply for a short-term bridging loan with us, simply click here.
Key takeaway
A bridging loan is ideal for those who need quick access to funds and want flexibility in their repayment options. This short-term financing option is often used to bridge the gap between the sale of an existing property and the purchase of a new one. However, they often come with higher interest rates and fees than traditional loans.
If you’re considering a bridging loan, check out our short-term loan products at Mango Mortgages. To ensure that there are no unexpected fees or charges, we maintain complete transparency and honesty regarding interest costs and fees. Our commitment to ‘right-size’ financing means we offer the loan amount necessary for your needs, rather than simply providing the maximum amount for which you qualify.
For more details, contact us today.
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