What is a bridging loan?
Prime Finance are specialists in the provision of high value short term loans with terms unmatched in the marketplace. When you find yourself needing finance whilst waiting for a property to sell, it is likely you need Bridging Finance.
A private bridging loan is a sum of money lent by a lender to cover an interval between two transactions, typically the buying of one house and the selling of another. Waiting to sell an existing property, but found the perfect ‘next’ property? There is a way to ‘bridge’ the gap. A private bridging loan may also be used to purchase an investment property with the loan repaid when the investment property is refinanced.
How much can I borrow?
It can sometimes take a while to sell your home, leaving you without the sales proceeds to buy your new property. With a bridging loan, you can avoid the stress of matching up settlement dates, move quickly to buy your new home and give yourself more time to sell your existing property.
Banks will normally add a 6 month interest rate buffer when assessing your ability to pay off the bridging loan. They’ll also discount the projected sale price of your existing property by around 15%, otherwise known as a “fire sale’ buffer. This can have an impact on your borrowing power at Prime Finance we do an as is valuation and we always take contract price of the property you are purchasing/purchased.
With Prime Finance we do Australia wide, residential, commercial, rural and industrial. Each application we look at it on its own merits LVR can fluctuate from 55% LVR to up to 80% LVR, the maximum loan amount with Prime Finance $1,500,000.00.
What should you consider when getting bridging loan?
One of the biggest issues in bridging finance is that the borrower may overestimate the likely sale price of their existing property and fall short of the amount required to pay out the bridging loan.
The other major problem is not being able to sell your property within the bridging period.
In addition, interest on the bridging loan will be capitalised on your peak debt and will compound monthly until the sale is complete and will cause your peak debt to increase. Keep in mind that you will only be able to capitalise repayments if you meet total Loan to Value Ratio (LVR) requirements set by the lender, which is usually capped at 80% of the peak debt.
Most lenders offering bridging finance do so on the condition that there will be an end debt.
In cases where there won’t be an end debt, such as downsizing your home, the fees associated with your loan may be higher.
Do you need a bridging loan?
Have you found that no another lender will help or consider unpaid judgement or default? We are the preferred funder Australia-wide who will take your situation into consideration.
Bridging loans are a great option if you need to move quickly to buy a property. Like any other home loan though, it’s not a debt to be taken on lightly and it pays to speak to Prime Finance so they can provide the right recommendations to you.
By taking out a private bridging loan, you can avoid the stress of trying to match up settlement dates, which gives you a better chance of selling your existing home without the pressure of time. Another typical reason why bridging loans are taken is when properties are purchased at auction, additionally developers & landlords can use bridging finance for development or renovation purposes.
What are the pros?
You can buy your new property right away: You don’t have to wait to get a loan.
Interest-only repayments, your bridging loan repayments are built into the loan amount during the bridging term or until you sell your existing property
Fees and charges: application fees and interest charges depend on the loan amount and loan period
Bridging loans 1st & 2nd mortgage loan/caveat loans
Bridging loans are no longer than a 12 month period
You can use a bridging loan to continue the smooth running of your business while looking for a more secure way of financing.
Bridging finance is a fast settling loan
Can provide quick finance for auction purchases
Prime Finance Bridging loan product guides residential purpose/business purpose
- Loans up to 1.5 million dollars
- LVR up to 80% of as is value (terms and conditions apply)
- Rate mortgage/caveat loan rate is 1% to 2% per month
Prime Finance Bridging loans securities
- Residential properties in metropolitan areas
- Rural / Residential properties (population over 50,000)
- Commercial properties
- Industrial properties
- Vacant Land (in metropolitan areas only, LVR up to 75%)