Thursday 1st October 2020
If you want to move into your new home fast, and don’t want to wait until your current home is sold, a bridging loan may be what you are looking for. A bridging loan is a short-term loan designed to finance a new home while you are still in the process of selling your current home. A bridging loan will streamline the transition process giving you more time to focus on moving in and less time spent managing finances.
How it Works
If you decide to take out a bridging loan your lender will take the debt you owe on your current home and add it to the amount required for your new home. This total amount is known as Peak Debt and is the total amount borrowed for a bridging loan including stamp duty and lender fees. Once you sell your old home the proceeds from the sale will contribute to your Peak Debt, which then becomes the End Debt. The End Debt is the final amount owed and is paid off as a standard mortgage until the end of the loan term.
Benefits of a Bridging Loan
Along with being able to purchase a home before you’ve sold your existing home, a bridging loan is usually repaid with interest only repayments before you sell your home. This along with the potential for the interest to be capitalised gives you valuable breathing room while you wait for your old home to be sold. The other major benefit is that you will be able to take out a loan for the full value of your new home. Therefore, properties that were outside of your borrowing capacity before are now purchasable after you sell your existing home and reach End Debt.
Bridging loans are a great option for anyone not wanting to wait until they have sold their old home to purchase a new home. We now what to look for in bridging loans in order to secure the right bridging loan to suit your circumstances.
If you would like to learn more about bridging loans and how they can help you secure your next home, please get in touch with us today.