Imagine finding your dream home, but you haven’t sold your current property yet. The fear of missing out is real, but that’s where bridging finance comes in. This short-term loan helps you secure your new home while giving you time to sell the old one. It acts as a financial bridge, removing the stress of coordinating two property transactions at the same time.
How Does Bridging Finance Work?
Bridging finance lets you borrow against the equity in your existing home to purchase your new property. It’s typically an interest-only loan, meaning you only pay interest during the bridging period. Once your old home sells, the loan is repaid, and you move to a standard mortgage for your new property.
There are two main types of bridging loans:
- Closed Bridging Loan: Best when you already have a confirmed sale date for your current property.
- Open Bridging Loan: Used when you’re still searching for a buyer and don’t have a fixed sale date.
Example of Bridging Finance in Action
Here’s a simple example to show how bridging finance works in practice:
Item | Amount ($) |
Value of existing home | 800,000 |
Existing mortgage | 300,000 |
Value of new home | 1,000,000 |
Total loan required | 1,300,000 |
Maximum LVR (80%) | 1,440,000 |
Bridging loan provided | 1,000,000 |
Interest cost (7% p.a. for 1 month) | 5,833 |
Remaining mortgage post-sale | 500,000 |
Once your old property is sold, the proceeds go towards paying off the bridging loan. The remaining balance becomes your new mortgage.
This is a straightforward example, but what if your situation is more complex? Maybe you need to bridge across multiple properties or require a custom solution. That’s where What If We Finance steps in—we specialise in crafting tailored solutions to make bridging finance work for you.
How Is Bridging Interest Paid?
Bridging finance gives you flexibility in how you manage interest payments:
- Capitalised Interest: The interest is added to the loan balance and repaid when your old property sells.
- Monthly Payments: You make monthly interest payments while waiting for the sale.
- Combination: Some lenders offer a mix of both options to suit your cash flow.
Maximum Loan-to-Value (LVR) for Bridging Finance
Most lenders allow a maximum LVR of 80% of the total property value. However, some may offer higher limits depending on your financial position, credit history, and the lender’s policies.
Not All Lenders Offer Bridging Finance
Bridging finance isn’t available from all lenders. Some major banks shy away from the risks, while specialist lenders and mortgage brokers—like What If We Finance—can help you access competitive options.
Bridging One Security vs. More Complex Solutions
Most lenders only provide bridging loans for a single property. But if you need to bridge multiple securities or require a more complex financial structure, expert guidance is essential. That’s where a mortgage broker can make all the difference.
Why Choose What If We Finance?
At What If We Finance, we make complex finance simple. Whether you’re buying before selling, juggling multiple properties, or need a custom solution, we find the right lender and structure to suit your needs. We know the ins and outs of bridging finance, ensuring you transition smoothly from one home to the next—without the financial headaches.
Don’t let the fear of missing out stop you from securing your dream home. Get in touch with What If We Finance today and let us help you bridge the gap to your future home!
