About Bridging Home Loans
A bridging loan was created to act as a solution for those who want to buy a new property while still waiting for their existing one to sell. It conveniently gives you the opportunity of not waiting around for your current property to sell in order to be able to say ‘yes’ to your dream home.
How this loan works in a practical sense is we will use both properties as collateral until such time that the existing property is sold. These are interest-only loans and the interest rate can be relatively high as you will be paying it on two properties until such time that your old home is old.
Compare our bridging mortgage interest rates and product features below.
Bridging loans can normally be arranged in a shorter period of time
Relatively little documentation is required to set up a bridging loan
A bridging loan is useful when you're in the process of purchasing your next home while waiting for your current one to settle
Bridging loans are typically more expensive than other mortgage types due to the increased risk to the lender
Additional fees and costs may be incurred with a bridging loan, which get amortised over a shorter period of time
What opportunities does bridging finance create?
Balancing mortgages while buying a new home and trying to sell your current one can be tricky. Worrying about whether or not you will sell your current house in time to pay for your new one can be stressful. In an ideal world it would all happen at once – you would sign on for your new home at the same time as selling your old one. However, at Mortgage House we know life doesn’t always go that nicely to plan. That’s why we offer bridging finance. Bridging mortgages were created for the exact problem we just outlined. They allow you to look for your next home, without the worry of having to sell your current one first. They can be the difference between snapping up your dream home, and missing out.
How long is the bridging period?
Most lenders and banks will agree to bridging mortgages of up to 12 months. Realistically, that should give you enough time to sell your existing home, especially in the current market. It will also give you a deadline to focus on. There are usually two types of bridging loans, and a lender can make an offer based on the level of equity in your home. The first one is a single loan using both properties as security. This is the 6-12 months option, where you aim to sell your existing home in that period. Once your home is sold, the proceeds will be put back into your overall debt and balance. The lender may also offer a separate loan for the house you are purchasing. You won’t need to make interest payments on this loan during the agreed bridging period. Interest will still accrue, and you will make your normal repayments on your existing loan. When your old home sells, the loan is paid out and any extra debt will need to be negotiated.
Are there other kinds of bridging finance loans?
Bridging mortgages are quite practical, in that they allow you to have access to cash by using both properties as collateral, until your old home is sold. They are interest only loans, but the interest can be quite high, because you will be paying interest on two loans. They can be organised very quickly, sometimes within a couple of days, which also makes them very attractive for investors.
Are bridging mortgages just for home buyers?
When it comes to property, bridging mortgages aren’t just for home buyers. They can also be handy for home builders. It makes sense to use a bridging loan if you are building a new home and want to stay in your current home until you are ready to move in. No one likes moving twice in a short period of time, and having to put up with a rental, especially with a family, for a short time can be tough on everyone. And if you are changing loans while doing all this, there may also be fees and charges to deal with. There are always lots of questions with bridging mortgages. They can be a real lifesaver, but they can be complicated, as well. At Mortgage House, our experienced advisors call walk you through the entire process, step by step, to ensure you have all bases covered.
How do bridging repayments work?
Most people will struggle to pay the interest on two mortgages at once, and banks and lenders understand this. As a general rule, you won’t make any repayments until your first home sells. A lender will approve your bridging loan based on whether you can pay it back after the sale of your existing, or current property. The proceeds of that sale is what you will normally pay a bridging loan back with. That can help you sleep even easier, and can push you to get the best price you can for your old home. And as we mentioned above, interest rates can be higher because there are two loans, and double the risk from the lender.