2022 Guide to Bridging Loans

April 4, 2022
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Found your dream home but haven’t sold your existing property? Is your bank taking too long to give you mortgage approval? Are you looking to renovate and then sell? A bridging loan could be for you.

At Bridgit, our loans are tailored to property owners looking for easy, stress free solutions. We aim to cut through the red tape imposed by traditional lenders and help you get to the next stage in your property journey quickly and with little fuss.

Here is our simple guide to common questions asked about bridging loans.

What is a bridging loan?

A bridging loan is a short-term finance solution designed to ‘bridge’ the gap between the purchase of a new property and the sale of your existing home.

When do I need a bridging loan?

When you want to buy a new property but have not sold your existing home. Therefore you wish to use the equity in your current property to make your new purchase, whether you are upsizing or downsizing. A bridging loan helps do this for you.  

How does it work?

In simple terms, the loan is secured against your existing property and the new one you are looking to purchase.

When you sell your existing property, you repay your bridging loan. This is where the term ‘bridge’ comes from – the loan is seen as a bridge from one property to another.

How much can I borrow with a Bridgit loan?

The maximum amount you can borrow is 75% of the existing property and the current property value, this is what we call the loan to value ratio (LVR). Once you apply with us, a valuation is done on both the current property and the new one which then determines the maximum LVR, plus we look at how much you need to borrow.

Find out more about the Bridgit loan

‍How long is the bridging loan period?

At Bridgit, we offer a six-month bridging loan. We offer this period to allow you enough time to move into your new home and sell your existing property.

Benefits of a bridging loan with Bridgit

Bridgit is uniquely set up to offer nothing but bridging loans. Our criteria and benefits are tailored to this market and may differ from other lenders. Our team is based in Australia and understands your needs

Buying your next dream home using a Bridgit loan, will look a little like this:

  • Interest free for the first three months with a set up fee from 1.65%
  • Same day approval
  • No monthly repayments
  • Simple online application process
  • Australian credit and customer service team

Find out more about the Bridgit benefits

‍How much interest will I pay?

At Bridgit we do it a little differently by offering the first 3 months interest free with a set up fee of 1.65% of the loan amount, this means you don’t constantly have interest building up. Thereafter the loan reverts to a 5.99%p.a. interest rate (6.16% p.a. comparison rate^).

Find out more about other associated fees and costs here.

‍What happens when I sell and am ready to settle the bridging loan?

When you sell your existing home and reach settlement on your Bridgit loan, there are two ways it can play out. Whichever way, we are here to help you.

  1. Pay the Bridgit loan out in full

    If you are downsizing or sell your existing home for more than the loan amount, you will pay out the Bridgit loan in full. This means after settlement you will have no mortgage remaining.
  2. Refinance to an alternate loan

    Generally the case when upsizing, once you have purchased your new home you will need to arrange a longer term mortgage with an alternate lender by the time the bridging loan period has ended. We do our best to make sure you qualify for a home loan before we offer you a bridging loan.  

How can I use a bridging loan to renovate?

If you wish to renovate your home prior to selling it, Bridgit can assist with an equity release to cover the value of the work.

If you have an existing mortgage, we will need to refinance it to provide the loan as we use the property as security. Once renovations are complete you simply sell and pay off the loan.

Scenarios where a bridging loan can help with your purchase:

  • You want to find a new property on your own terms:
    Take your time and make sure you find the right home by using a bridging loan to purchase first, then sell.
  • Avoid the hassle of moving multiple times:
    Don’t want to risk having to move, rent and move again? Use a bridging loan to buy first and then sell.
  • Settlements don’t line upon the purchase and sale:
    Bridging allows you to access funds securing against your current property to settle the new property, so you don’t lose your deposit.
  • Renovate before you sell to add value:
    Use a Bridgit loan to access your home equity for funds to renovate, then sell.

Can I use bridging finance if I have an existing mortgage?

Yes, the bridging loan will need to cover the existing mortgage and the new purchase. If you need another long-term mortgage once you have sold your property, you simply refinance to  a standard home loan with another lender.

‍Can I use a bridging loan if I am downsizing and have no mortgage?

Yes, this is a perfect bridging scenario. You use the existing equity in your property to downsize into a new home on your terms, then sell.

Can I use a bridging loan if I am self-employed?

We do our best to lend to everyone, no matter their employment status. If you are self-employed, we require either:

  • the standard 2 years of tax returns plus financial statements; or
  • alternatively, you can apply for an alt doc/low doc bridging loan with an accountant’s declaration

Timing can be key:

Often with a bridging scenario you need to move quickly. Your settlement may have unexpectedly been moved OR you have found that dream home to buy and don’t want to miss it.

At Bridgit, we have disrupted the traditional Australian lending market to help with bridging loans like this which previously could take up to three months to approve. Using technology to speed up the application criteria and process loans quickly, we pride ourselves on aiming to offer same day approval.

Is the application process the same as a 30-year loan?

Our application process is quick and easy. The technology we use allows your loan information to be processed much faster than a traditional home loan.

Simply complete the online application process and if Bridgit it right for you, receive same day approval.

For downsizing scenarios or when you do not have a mortgage on your existing home, there is no need to provide documentation on income and expenses. We complete the necessary valuations to ensure we are confident your property has the value to cover the loan.

Bridgit is the newest bridging loan lender in Australia, and we solely focus on bridging which puts us in a unique position.

Find out more about Bridgit bridging loans here.

Disclaimer

^ Comparison rate calculated on a $150,000 secured loan over a 25-year term. WARNING: Comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Comparison rates for interest only loans will not reduce your loan balance. This may mean you pay more interest over the life of the loan. 1.65% set up fee and government charges apply.

Eligibility and approval is subject to standard credit assessment and not all amounts, term lengths or rates will be available to all applicants. Fees, terms and conditions apply.

Bridgit Loans
Bridgit is a non-bank lender on a mission to revolutionise bridging loans, allowing Australian homeowners to access the equity in their property so they can buy first and sell later. When it comes to buying property, it can be very competitive and difficult to find the perfect home, a Bridgit loan is a great option for homeowners who want to know their purchase power and buy their next property without the uncertainty of selling first.
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