Bridging Finance

Bridging or home to home mortgages are the same things, just different terminology. These types of mortgages basically increase your current home loan to buy your new home. You may be able to borrow the fees too, like the transfer stamp duty on your new home. You may also have the option of borrowing some extra money to help with the repayments, during the 'bridging' finance period. Once your current home is sold, the funds from the sale will pay down your home loan, and you will end up with your new loan. The 'bridging' part of the home loan, is the period when you have a mortgage on both homes.

Most banks and lenders do offer bridging finance. It is important to note, that there are different rules with each bank or lender when it comes to bridging finance, so it is advisable to speak to your Mortgage Broker first, and learn all the options that apply to your situation. It too is advisable to consider having your 'bridging' finance pre approved, as this will give you some comfort as you begin to look for your new home.

Bridging finance is generally a little more expensive, as most banks or lenders won't discount your interest rate during the 'bridging' period of your home loan. The standard variable interest rate of a particular bank or lender, is generally the interest rate during the 'bridging' period of your home loan. Some banks and lenders too, may increase the interest rate after a certain period of time (eg. 3 months) during your 'bridging' finance period.

Once your 'old' home is sold, the funds from the sale will be used to pay down the 'bridging' home loan, thus ending the 'bridging' part of your home loan. At this stage, you will have your new home loan, and if applicable, a cheaper interest rate than 'bridging' finance offers.

Advantages

  • You may be able to purchase your new home before you have sold your current home.
  • You may be able to move straight into your new home without the need to rent or stay with friends or family.


Disadvantages

  • Harder to work out exactly how much your new home loan will be, as your current home hasn't sold, and you wont know how much is will sell for.
  • You will be paying home loan interest on both mortgages, during the 'bridging' period, so the interest repayments will be more expensive during the 'bridging' period of your home loan.


General Bridging Finance Home Loan Fees

  • There may be an application fee.
  • There may be a monthly or annual fee.
  • If your loan is greater than 80% of the property value, you will pay a once off mortgage insurance fee.
  • The interest rate maybe more expensive, or increase during the bridging part of the home loan.


Loan Term And Repayment Types

  • Generally speaking most banks or lender only allow the 'bridging finance' part of the loan for 6 to 12 months.
  • During bridging interest only repayments may be required.
  • Interest capitalization may be available (where you don't make repayments, and the home loan interest accrues during the bridging part of the home loan).


If you would like some more information about bridging finance, contact Perth Mortgage Broker Group , or call Troy on 0411 229 602, 7 days a week.

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