Introduction
In the ebb and flow of the real estate market, navigating through market lulls can be a challenge. At Sandcastle Finance, we understand the importance of providing sellers with options that suit their unique circumstances. One such option worth considering is the bridging loan.
+ What is a Bridging Loan?
A bridging loan, or bridging finance, is a short-term financial solution designed to assist you in purchasing a new property while your current one is still on the market.
Traditionally, individuals sell their existing homes first, leveraging the equity to fund the purchase of a new property. However, there are instances where the flexibility of a bridging loan may align better with your needs.
+ How Does a Bridging Loan Work?
Imagine finding your dream home while your current property is yet to be sold. A bridging loan essentially acts as a financial bridge, covering the gap between acquiring your new property and receiving funds from the sale of your existing home. It provides a line of credit, allowing you to navigate the period between buying and selling seamlessly.
It's crucial to note that during this interim period, you'll be responsible for repaying both your original home loan and the bridging finance loan. Evidence of your ability to cover the interest costs during this period is a key requirement. The repayment period for the bridging loan typically spans 12 months post the sale of your property.
Timing the Sale: Navigating Market Conditions
+ Seasonality
While spring is traditionally the peak season for property sales in Australia, selling during quieter periods, such as winter, can have its advantages. With fewer listings, your property stands out to potential buyers.
+ Market Conditions
Understanding market dynamics is essential. A seller's market implies high demand, potentially leading to a quicker property sale, whereas a buyer's market requires patience and realistic pricing.
+ Helpful Tips for Sellers
Stay informed about your local property market by:
- Monitoring weekly property sales in your preferred area.
- Staying updated on broader economic trends and interest rate movements.
Selling Strategies: Before or After?
Selling Before Buying
Pros
Certainty about the amount available for your next purchase.
No need for a bridging loan, avoiding dual loan repayments.
Time to wait for an optimal sale price.
Cons
Potential temporary housing challenges.
Additional expenses and stress of moving twice.
Risk of market price increases affecting your buying power.
Buying Before Selling
Pros
Avoidance of rental costs and multiple moves.
No urgency in finding a new house.
Capitalising on a rising market for potentially better returns.
Cons
Potential need for a bridging loan.
Higher interest rates on bridging loans compared to standard term loans.
Management of dual mortgage repayments.
Options When Bridging Finance Isn't Ideal
While bridging finance has its merits, it's not for everyone. Consider alternatives:
Negotiate a longer settlement period on the sale of your home.
Rent your home from the new owner to extend your search.
Explore temporary living arrangements with family or storage solutions.
Remember, every financial decision is unique. Before opting for a bridging loan, consult with one of our advisors at Sandcastle Finance to ensure it aligns with your specific needs and circumstances.
We offer a complimentary 30 minute consultation to ensure you get the right finance solution.
Sally Prowse
Director
Ph: 0400 570 051
Email: sally@sandcastlefinance.com.au
Camilla Bowhill
Finance Broker
Ph: 0403 852733
Email: camilla@sandcastlefinance.com.au