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Consumer - Property Finance - Bridging Finance
Bridging Finance is the same as Residential mortgage inly that it is used as a short term solution to enable the borrower to purchase or construct a new home before the settlement takes place on their current home. They are often referred to as “home to home” loans. This type of loan is usually sought after by borrowers who are purchasing a new home or building a home, to enable them to stay in their current property until the new one has settled or been constructed. The borrower then usually sells their current property and pays out the bridging finance amount leaving an end debt.
EXAMPLE
| Current property value = | $350,000 |
| Current mortgage = | $150,000 |
| New property value = | $450,000 |
The client in this case will want to borrow $450,000 to purchase the new property while he sells his current property, or in the case of construction, while it is being built.
| Total property values = | $800,000 |
| Loan required = | (existing loan) $150,000 |
| And (new loan) $450,000 | |
| Plus fees lets say $15,000 | |
| Total Loan = | $615,000 |
| LVR = | 76.9% |
The bridging finance amount would be $450,000 plus the fees of $15,000 = $465,000
The original loan would remain the same as it is now When the current house is sold, the amount of $350,000 or thereabouts (value of current house), would be paid off the bridging loan and an end debt of $265,000 would remain.
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