“How long will you be able to look after two loans for?” asks Haslam. “One of the biggest issues in bridging finance is that the borrower may have overestimated the likely sale price of their existing property, and falls short of the amount required to pay out the bridging loan.”
As with all residential property transactions, its important not to let your emotions get in the way, says Wilson. “Don’t think with your heart, and create an idealised figure in your head that you think your property is worth. Be prepared to meet the market.”
Bridging loans are still subject to the usual array of mortgage-related costs, according to Wilson. “The application fee for the bridging loan is generally around $600, which includes a valuation of one of the properties. The valuation of the other property will cost between $200-$220.”
You will also be up for a mortgage registration fee of around $100, and stamp duty on the mortgage, which is about $4 for every $1,000 worth of funds borrowed.
However, the greatest risk is that your property will not sell within the bridging period. “If you don’t sell your existing home within the bridging period, a lot of lenders will up the interest rate. Most will require you to bring the loan back to a principal and interest basis and service both loans – this can get ugly,” warns Wilson.
If structured correctly, with realistic timeframes and price estimates, bridging finance can ease the pressure of matching up settlement dates, and give you time to sell your existing property whilst securing your new one. It’s not without its risks, and requires some careful research, but if you do your sums right, you’ll be out of your old home and into your new one with minimal hassle.
Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker