If you want to buy a new home and haven’t sold your existing home, then you may need a bridging loan. Bridging finance provides funds for the purchases of a new home until the existing home has been sold. It’s is the best way of moving a new property without having to wait until your current home is sold.
What Is a Residential Bridging Loan?
Residential Bridging loans are the temporary loans that a property owner takes to bridge the gap between the selling of a current home and buying of a new home. Bridging finance home loans are secured to the purchaser current property. The money from this loan is then used for the down payment for the new home.
Types of Bridging Loans
These loans are categorized into open and closed finance and these are described as:
- Open Finance: This type of finance is for those borrowers who are about to sell their existing property. There is no specific date for the loan settlements. In addition, open loans can be used for various purposes except purchasing a property.
- Closed Finance: This type of finance is meant for the people who have sold their possessions but have not so far obtained the payment. For this type of loan, lenders set a specific date for the payback of the loan and it is generally supported by the authorized contracts.
How Does It Work?
A bridging loan is calculated by adding together the value of your new home with outstanding debt owing on your existing home and then subtracting the potential sales price of your existing home.
The leftover amount is known as the principal or ‘ongoing balance’ in your bridging loan. During the bridging period, you are required to pay back the interest amount calculated on the principal. Interest will be compounded monthly at the standard variable rate and it is added to your ongoing balance, which becomes your loan on your new property when your old one has been sold.
In order to avoid paying a considerable amount of interest, it is best to have at least 50% of your existing home’s value in equity before you consider a bridging loan.
The Benefits
The purchase can avail the following Bridging Home Loan benefits:
- By taking a bridge home loan, one can purchase a new home before selling the current one.
- The interest payable on this loan is applicable only after few months the buyer takes it.
- It is a short term loan which that anybody can opt for this. The person will have to pay a smaller amount of interest as tenure period is less.
- Even when the borrower is not able to sell the old property within the specified period of time, the possession of the property will remain in the hands of borrower itself.
If you think that Bridging Home Loans can provide the best solution while you sell the current home and purchase a new one, then you must contact GCC Home Loans. They can help you find out the lenders who are willing to provide the borrowers with bridge loans. Visit their website today and evaluate more options.
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The value of homes in and around most of Australia’s capital cities are set to continue on a downward trajectory, according to a survey carried out by economists, with Sydney’s property market experiencing the most dramatic fall.The survey, which was taken by 15 leading property and finance experts, shows that almost all of the nation’s major cities bar Adelaide and Hobart are expected to see a drop in the value of residential properties.
Indeed, 93% of respondents stated that they expected a price dip in Sydney, with 57% expecting a decline of at least 5% over the next year.
What’s more, the mere 7% who expected prices to rise predicted only a minor increase of around 1-2%.What About Other Cities?Perhaps unsurprisingly, many other cities were predicted to take a similar path to Sydney, with 93% also expecting a price drop in Melbourne, 100% predicting a drop in Darwin, 75% believing Perth will take a hit and 61% predicting Brisbane to follow the trend.What Does This Mean For Home-Owners, Buyers, And Industry Professionals?For first home buyers and those hoping to make a move, the market environment presents an opportune moment to get moving.
If prices continue to tumble, buyers could realistically take advantage of a great bargain before the market starts to recover.
Indeed, with smaller deposits needed to get on to the property ladder, young people and renters who have had a tough time over the past few years could see a turn-around in their luck.For private lenders offering home loans to these buyers, the market presents a mix of new challenges and opportunities.
Firstly, it is important to note that with property prices becoming more affordable, the number of buyers who no longer need a loan is, of course, going up.
Bridging Finance or bridging loan is a short term loan which bridges the finance gap between selling your existing property and buying a new one.
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