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Home owners want to be able to sell their existing home and purchase a new one around the same time, but unfortunately sometimes it doesn’t always happen in the correct order.

Home owners want to be able to sell their existing home and purchase a new one around the same time, but unfortunately sometimes it doesn’t always happen in the correct order.

A slowing market, price fluctuations and just general market unpredictability often results in homeowners finding their new home before selling their existing one. Offers subject to the sale of an existing home could mean that you risk missing out on the property of your dreams. How can homeowners find the funds to secure their new home in this situation? This is where bridging finance could provide a solution.

Bridging finance is a home loan that enables you to purchase a new property prior to selling your existing property. Most bridging loans allow you six to 12 months to sell your existing property.

The lender will calculate your loan in two amounts - the bridging amount and the end debt. The bridging amount is the amount that will be paid out once the property is sold. The end debt is just secured over the new property and this will be your new loan going forward once everything settles. As a general rule of thumb you would need to have at least 20% equity in your existing property for bridging to be possible.

For bridging loans, all the estimates are conservative and factor in all costs involved to hopefully avoid any nasty surprises. The property you are selling will be valued and then this amount discounted by around 15% to estimate how much you may potentially sell for. Costs of buying and selling are also factored in. This will include agent’s fees, conveyancer costs, stamp duty and transfers. Interest for the bridging amount may also be added onto the loan so that you don’t have to make repayments on the bridging amount at the same time as the new loan.

If this is sounding complicated don’t despair. A skilled lending professional can do all the calculations for you and explain the different lending options available for bridging. It is important that you do your homework when it comes to choosing a lender for bridging finance so you know exactly what you are committing to. Loan features, terms and conditions as well as the fees as these can vary between different lenders. State Custodians has a wide range of over 30 lenders on their panel that they can advise you on. Our Lending Specialists have the in-depth knowledge of bridging loans to work out if it is possible and then be able help you find the best option for you.

But ensure that you have done all this early. You should look to have your bridging loan unconditionally approved prior to exchanging contracts unconditionally on the new purchase so that you don’t expose yourself to risk. Advice from a solicitor on your legal obligations and rights would also be advisable.

Ideally you would sell your existing property prior to purchasing. But we know that things don’t always work out the ideal way. With the right home loan, realistic time frames and price estimates, a bridging home loan can help take the stress out of buying and selling property. However, just like any financial commitment, you need to take the time beforehand to research your options and determine if it is the right option for you.

If you are interested in exploring bridging home loan options, our Lending Specialists can help. Give them a call on 13 72 62 or enter your details HERE for someone to call you.