Clients often find themselves in the position of wanting to buy their next dream home without having sold their existing home, or not even considering this scenario because they aren’t aware that there are financing solutions available that can make this a reality. Lenders understand that timing can be tricky when transitioning between homes and therefore most of them offer bridging or relocation loans, let us explain a little further how this works.
As the name implies, this product enables you to finance the purchase of a new home before having to sell and repay any debt on the existing home, effectively providing a bridge. It works as follows – lenders provide you with a short term loan covering the total debt required on both properties, once the existing property is sold, the existing loan/debt is retired and you are left with the “new” loan.
Whilst most banks in the market offer bridging loan products, they all have varying degrees of appetite for these loans and this is reflected in their specific policies. Some lenders want to ensure that you can service and repay the loan based on the combined debt or “peak” debt position. Others are more comfortable assessing you on the “end” debt position, i.e. what is the loan amount that you will be left with once you have sold the existing home and repaid that loan.
Navigating through the various aspects of bridging loans can be tricky, therefore the key message that we would like to leave you with is that firstly, there are options available to you and secondly, planning is key. We encourage anyone who is considering buying and selling to work through a bridging loan scenario so you can understand what your position is and what your options are, it really could make the different between securing your next dream home or missing out.