Steps to take when considering a bridging loan
The decision to take a bridging loan can be both exciting and daunting as homeowners navigate the delicate balance of selling their current property while securing a new one.
The decision to take a bridging loan can be both exciting and daunting as homeowners navigate the delicate balance of selling their current property while securing a new one. However, understanding the key points to consider and exploring alternative options can help alleviate anxiety and provide a more comprehensive approach to this financial endeavour.
Here’s some points to consider when taking a bridging loan that could help to eliminate some stress:
- Prioritise getting your home sale ready. If you need to do any repairs or renovations to your home prior to selling, it may be better to get these out the way before you commit to purchasing another property. If any delays should occur then it won’t impact the 12 month timeframe you have to sell the home under the bridging loan. Plus, you can get a more accurate appraisal from the real estate agent if they’re able to see the finished product, which helps with estimating your budget.
- Negotiate a longer settlement. You can consider negotiating a longer settlement for a home you’re looking to buy if the seller is willing. This could give you a little more time to get your house sold and help minimise the ‘peak debt’ period on the bridging loan.
- Do the maths and give yourself a buffer. It’s important to chat to your Community First Mortgage specialist and real estate agent to work out the costs, repayments and how much you can borrow based off some worse case scenarios rather than best case scenarios. That way you’ll be able to withstand any shocks to your budget or borrowing power and avoid any nasty surprises.
- Do the maths and give yourself a buffer. It’s important to chat to your Community First Mortgage specialist and real estate agent to work out the costs, repayments and how much you can borrow based off some worse case scenarios rather than best case scenarios. That way you’ll be able to withstand any shocks to your budget or borrowing power and avoid any nasty surprises.
What other alternatives are there?
What other alternatives are there? - Re-think your living arrangements. If you decide a bridging loan is not for you, but you’re still determined to move, you will need to look at selling your home first. Once the property has settled, if you still haven’t found a new place to move in to, you may need to consider either staying with a friend or family or renting, even if it means paying a penalty to break the lease early once you find something.
- Consider a deposit bond. If you don’t go down the path of a bridging loan but do find your dream home before your current home has settled, a deposit bond could help. You can use a deposit bond in place of cash for the deposit required (e.g. 10%). Then, at settlement, you pay for the full purchase price, including the deposit amount and other costs. By the time settlement were to happen, your home would be settled and you’d have the funds to complete the purchase.
- Do the maths and give yourself a buffer. It’s important to chat to your Community First Mortgage specialist and real estate agent to work out the costs, repayments and how much you can borrow based off some worse case scenarios rather than best case scenarios. That way you’ll be able to withstand any shocks to your budget or borrowing power and avoid any nasty surprises.
- Delay the move. Likely the least popular option however of waiting until you pay your loan down more, save more of a deposit or await better market conditions are all possible solutions if you’re not yet keen to take the plunge in to either a bridging loan or the hassle of selling, potentially renting and moving again.
By implementing these strategies and exploring alternative options, homeowners can navigate the bridging loan landscape with greater confidence and minimize stress associated with the transition. Each approach offers its own unique benefits and downfalls, where you can make informed decisions based on your specific financial circumstances and goals.
Credit eligibility criteria, terms and conditions, fees and charges apply. Community First will need to hold a first registered mortgage over any properties being taken as security.
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