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Bridging the Gap

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Ideally, you’d sell your house one day, and move straight into your new home the next, and this would all happen on a long weekend.

But, unfortunately, the complexities of the market, buyers, sellers, agents, removalists, conveyancers, government, and a thousand little other things all interacting with each other means that stars in the new home universe rarely align. Perhaps you will need a Bridging Loan.

Buying then selling

Your perfect next home has just come on the market, and you want to get it before it’s gone. But it could be gone in a few weeks, or even a few days, and getting your own house sold will likely take much longer than that.

If you’ve already paid off the house you’re in, then great! That just means applying for a fresh home loan from us.

But what if you’re still under your current home loan?

This is where a bridging loan comes in. It acts to as link – a bridge – between the two loans you’ll have if you’re buying before selling.

It works like this:

Let’s say you still have $200,000 to pay off on your current house, which is worth (and you’ll sell for) $500,000.

The new home you’re eyeing off is $600,000…but you haven’t sold your current house yet, and you don’t have the cash to cover both properties’ repayments.

A bridging loan will cover you for the cost of paying off your existing mortgage, plus the cost of your new home:

$200,000 + $600,000 = $800,000

You then sell your current home for $500,000. That’s taken away from the bridging loan amount:

$800,000 – $500,000 = $300,000

Your loan on your new home is now $300,000.

Keep in mind that this is a very simplified overview of how a bridging loan works. Bridging loans are for the extreme short-term – six months to a year – to cover your transition from property to property. As such, they may attract higher interest rates, and often come with the usual application and exit fees associated with regular home loans.

The upside is that many lenders understand the temporary nature of a bridging loan, and won’t ask you to make any actual periodic repayments on it, or ask for only the interest on the loan to be serviced. Some won’t ask for you to do anything at all until your change of properties has completely settled – you’ve completely crossed the bridge, so to speak, and stepped off the other side.

It’s important to get more specific information from one of our lending team.To book an appointment contact us on 02 6763 5111, Enquire Online, or visit one of our branches.

Selling then buying

You want to sell your current house, but you’re not ready to make a decision on your next home yet.

Selling before buying offers great financial advantages, but there are also a few gaps you should keep in mind as well.

On the upside, you get plenty of time to shop for a new house, and buy it, and move into it, at your leisure. You’ll have sorted out your finances, and paid off any remaining debt on your old house when you sold it – and possibly made a nice profit on the sale!

On the downside…you still need somewhere to live in the gap between the selling and buying. Some people can move in with friends and family. For extremely short-term stays, some stay in hotels (but this gets very expensive, very quickly).

The most popular option is renting. It’s cheaper than a hotel, of course, and doesn’t put strain on your relationships. The downside is that you still have to find a rental property, and sign a lease, which you may need to break if you find your dream home to buy. But breaking a lease is still often easier and cheaper than the alternatives, and gives you a solid base to house-hunt from.

You should also consider that you’ll have two lots of moving to do and two rounds of setting up utilities, as well. But it can be worth it not to have to juggle two houses at once.

So, if you had to choose...

...between buying then selling, or selling then buying... Well, as usual, it depends on the market and your individual circumstances.

Which to choose?

Always remember to discuss your concerns with your legal and financial advisors. For all loan enquiries chat with a member of our lending team by arranging an appointment on 02 6763 5111 or visit one of our two Tamworth branches in Peel Street and Tamworth Shoppingworld, or our Gunnedah or Narrabri branches.

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