Top Questions To Ask Before Applying For Bridging Finance in Australia
For people who want to purchase a new home by avoiding the hassle of selling the existing place, bridging finance can be their ideal friend. They will have the convenience of buying their dream house first and selling the current one afterwards.
However, before visiting any business loan lender, it is imperative to inquire about the right questions beforehand. It is crucial because if you understand how the entire process works, you can navigate it with ease.
So, to help you with this, below, we have provided some vital questions to ask before applying for bridging finance in Australia. Therefore, go through this to know everything before you apply for a loan.
What is the actual meaning of bridging finance?
Before you go to 2nd mortgage lenders to apply for bridging capital, you should ask this question to get a clear concept of bridging loan. As you might know, this type of finance enables borrowers to buy a new property while still residing in their existing home. It is a convenient funding option as it allows them to purchase a new home, borrowing up to 100% depending on equity plus the costs of that new property. Besides, the bridging loan also directs you to pay the debt down to a reasonable level once the current home has been sold and settled. Therefore, this is all about bridging finance, and you should ask this fundamental question before applying for it.
Is a bridging loan a suitable option for your requirements?
It is another question you should know the answer to before applying for bridging finance. When you visit business loan lenders, it is their responsibility to discuss suitability. They should give you examples, pros, and cons of different loan options to help you to determine whether a bridging loan can be your perfect choice or not. Besides, if you want to avoid the hassle of selling your current property before buying a new home, home opt for bridging finance as it offers that convenience and flexibility. Thus, if purchasing a new home is your primary requirement, then this funding alternative is the right choice for you.
How do you qualify for bridging finance?
Another crucial question to inquire about before applying for bridging finance in Australia is how you can qualify for the loan. First of all, you should have a decent amount of equity in your existing home to get access to bridging finance. This number is essential, as the LVR for the maximum debt during the bridging duration must be 75% or less. This LVR number across the two homes would incorporate the principal borrowed and any interest capitalized during the bridging time. Therefore, if you have 75% or less LVR, you can easily qualify for the loan. Thus, before going to a lender, ask this question and determine whether you have that LVR number or not.
What security do you require to qualify?
It is another vital question as the security needed for qualification varies across the lenders. Most 2nd mortgage lenders accept any property for the loan security if the property’s value can cover the loan amount. They consider both commercial and residential property for this. Besides, if you have an already mortgaged property, you can use it as a security because it has enough equity, covering the loan efficiently. Therefore, it is needless to say that you should consider this question beforehand for easily qualifying for bridging finance by providing the proper security.
Who can offer you a bridging loan?
You will get multiple business loan lenders willing to give you bridging finance. Besides, some traditional banks offer this type of loan if you are their existing customer. However, other banks will only provide this if you have an unconditional contract of sale for the property. It indicates that you cannot buy a new home without selling the current one. Besides, some banks also demand premium charges for the bridging period. Therefore, it is always wise to go to a reputable lender and apply for bridging capital.
What will you do if you find the bridging amount is not enough?
There are some scenarios when borrowers understand the amount they got is not enough. In such cases, you need to discuss with your lender if you have a decent amount of equity in your property. Remember that if you have a large amount of equity on the property, the lender should offer a satisfactory amount. In that way, you might get some additional funds that might be sufficient for you.
What are the benefits and drawbacks of buying a new home with bridging finance?
As discussed several times, the benefit of a bridging loan is you can buy a new home by holding the existing property. As a result, you can easily bypass the staying requirement with relatives, friends, or rent. Due to this, you can save a lot of money and time until the right property presents itself. So, it offers both convenience and flexibility. On the contrary, bridging finance is restrictive and complicated over time. You might need to sell your at a much cheaper rate to repay the loan amount within the allotted period. Therefore, consider its pros and cons before applying for bridging finance in Australia.
End Takeaway
Therefore, whether you visit 2nd mortgage lenders or others, you should ask these questions and get proper answers before applying for a bridging loan. After all, you will not get the opportunity and convenience to buy a new home before selling your existing property. It is beneficial as you do not need to bother paying rent or staying with your relatives. So, consider all these before applying for the loan.