Bridging finance

Unfortunately it’s rare that buying a new home coincides neatly with selling the existing one. This is where a bridging loan could be a potential solution.

Bridging the gap between old and new homes

If you find yourself with two properties and two mortgages to pay, you’ll need to investigate your options. One option is checking if the seller will allow an extended settlement period, giving you more time to find a buyer for your current home. Or, you could also look into bridging finance.

What is a bridging loan?

A bridging loan, or bridging finance, is a short term loan typically with a term of six to 12 months, which covers both the existing and new debt.

Do your homework on loan features, conditions and structures because they vary between lenders. For example, some lenders will request regular repayments for both the new and existing debt, which can create significant financial strain. Other lenders may add the new debt’s interest payments to the total loan balance for the next home but allow the borrower to hold payment until the first home sells.

Also, be realistic about the price you expect for the first property. You may need to lower your expectations in order to meet your bridging finance period and/or to sell sooner.

See our Next Home Buyers FAQs for detailed answers to commonly asked questions about bridging loans.

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