What is a Bridging Loan?
How a Bridging Loan Can Help You
A bridging loan is a kind of short term funding option. Such loans are primarily created to assist individuals in completing the purchase of a particular property before they sell their present home. In such cases, money is loaned to the individual for a short period of time.
A bridging loan is a useful option to home movers in case there is a gap between the sale and completion dates. This kind of loan can be particularly helpful for an individual who plans to sell his or her home after renovating it, or buy a home through an auction.
Who can take a bridging loan?
Technically anyone with a property can apply for a bridging loan. This kind of loan can also be perfect for property developers and landlords. It specifically targets those who buy properties from auctions since there is a requirement for a quick mortgage in such a case. A bridging loan can also be provided to borrowers who have many assets and who prefer an uncomplicated lending method when it comes to residential properties.
What are the types of bridging loans?
Bridging loans can be classified into two principal types: “open” bridge and “closed” bridge.
Open bridge: This is often preferred by property purchasers who have discovered the property they have always wanted, but could not place their existing home in the property marketplace. In such cases, the lender may require extra information with the help of supporting documents. The equity of the properties can hold particular importance here because the property has not yet been sold.
Closed bridge: This can be available exclusively to property purchasers who have completed the exchange on the sale of their existing property. A closed bridge loan works by making finance available during the period of time before the official monetary exchange has taken place.
What to expect when you apply for a bridging loan
With some lending organisations, you can expect the lender to ask you for the mortgage offer on the new property, complete details of the new property and proof that your existing home is being marketed. The lender may also query on how you will payback the interest and may ask about your exit strategy in case there is a no sale after a few months.
Many lenders place a 12-month restriction when it comes to an open bridge loan. After the 12 month period, many lenders will renegotiate as long as the interest is being paid.
NSW Mortgage Corp is a mortgage specialist. We offer flexible options that meet our client’s needs, meaning you can secure a bridging loan that truly suits your situation. To find out more about our bridging loans, please call now us on 1300 137 778 or enquire online.