Bridging loans provide a convenient way to buy a new property before the sale of your existing home. They are commonly used to finance the purchase of a new property while your current property is being sold, but also provide finance to build a new home while you live in your current home.
Secure finance for moving between properties
For peace of mind during the transition between homes, talk to your local Loan Market mortgage broker about securing a bridging loan with a low interest rate. Fill in the form below OR call us at any time on 0508 722 205 (+64 9 526 0122).
Find Out About Your Home Loan Options
How does a bridging loan work?
As the name suggests, a bridging loan ‘bridges the gap’ between two home loans. The lender you choose takes security over both properties and lends against these properties until the sale and purchase process on both is completed. During a bridging loan period, your home loan will generally be charged as an interest-only loan. Many lenders offer interest rates comparable to the standard variable rate, or only slightly above.
Some lenders may allow you to capitalise the interest on a bridging loan, relieving you of the necessity of making loan repayments during the bridging period. If you choose to capitalise the interest you will most likely have a slightly higher new home loan to cover the capitalised interest.
When you sell your first property, the proceeds of the sale are applied to the bridging loan, and any remainder becomes the end debt or new home loan. At this stage your home loan will usually revert to the lender’s standard variable interest rate or the interest rate you have negotiated.
Many home loans these days have a loan portability feature – in part or total. Portability allows you to transfer your current loan from your old property to your new one, thereby avoiding many of the setup and ongoing costs associated with a new loan. Not all lenders and loans will have this feature so make sure you check with your mortgage broker when you setting up your home loan. You can read more about loan portability in our home loan features section.
Bridging loan pre-approval
Understanding which option is the right one for you before signing a contract for the sale or purchase of your property is essential, so organise a bridging finance pre-approval by contacting your Loan Market mortgage broker.