Bridging Finance

A bridging loan is when you require finance to purchase a second property with the intention of selling the existing one. A bridging loan is typically an interest only payment home loan with a limited loan term.

It is an additional home loan that you take out on top of your current home loan on your current home until you sell your current home and close your current loan. This means during the bridging period, you have both loans and both loans are being charged interest.

Some loan structures only require you to make repayments on your original loan until settlement. During the bridging period, the interest on the bridging loan gets added to your ongoing balance on your bridging loan but you don’t have to make repayments on it until your existing property is sold. Other loan structures require you make payments on both loans from the time you open the new loan.

Because a bridging loan means you are having to carry two mortgages at once, a bridging loan is not for everyone. You wouldn’t want to overestimate the sale price of your current home and find that your bridging loan for your new home is actually not affordable.

Then when your current home is sold, the bridging loan is converted into a normal principal & interest repayment home loan for your new home, and you start making repayments on the new home loan.

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