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Find and compare bridging home loans

Loan purpose

Loan amount

$

Deposit

Loan Term

151015202530

1 year

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Product

Bridging Home Loan

Real Time Rating™

1.92

/ 5
Interest Rate

4.40

% p.a

Variable

Comparison Rate*

4.44

% p.a

Company
Repayment

$25,600

monthly

Features
Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.92

/ 5
Go to site

special

Apply for a 3 or 6 month repayments reduction for environmental upgrades
Product

Bridging Loan

Real Time Rating™

1.33

/ 5
Interest Rate

5.27

% p.a

Variable

Comparison Rate*

5.27

% p.a

Company
Repayment

$1,318

monthly

Features
Redraw facility
Offset Account
Borrow up to 84.99%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.33

/ 5
Go to site
Product

Bridging Loan

Real Time Rating™

1.33

/ 5
Interest Rate

5.27

% p.a

Variable

Comparison Rate*

5.27

% p.a

Company
Repayment

$25,719

monthly

Features
Redraw facility
Offset Account
Borrow up to 84.99%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.33

/ 5
Go to site
Product

Bridging Home Loan

Real Time Rating™

1.33

/ 5
Interest Rate

5.29

% p.a

Variable

Comparison Rate*

5.37

% p.a

Company
Repayment

$25,722

monthly

Features
Redraw facility
Offset Account
Borrow up to 72%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.33

/ 5
Go to site

Cashback

Up to $4000 Refinance Cashback Offer ~ Ends in 11 days
Product

Bridging Home Loan

Real Time Rating™

1.33

/ 5
Interest Rate

5.29

% p.a

Variable

Comparison Rate*

5.37

% p.a

Company
Repayment

$25,722

monthly

Features
Redraw facility
Offset Account
Borrow up to 72%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.33

/ 5
Go to site

Cashback

Up to $4000 Refinance Cashback Offer ~ Ends in 11 days

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What is a bridging loan?

A bridging loan gives you the money you need to buy a new home before you’ve sold your existing property. When buying and selling real estate, it’s not always possible for the stars to align and the settlement dates to match up, which is when you might need bridging finance to plug your funding gap.

The loan is usually short-term up to a maximum of 12 months and many loans will not require you to make repayments until the sale of your old property is complete. However, you do have the option of making payments on the bridging finance to reduce your interest bill at the end.

Bridging finance can usually be secured quite quickly so you don’t have to miss out on buying that dream home.

How long does a bridging loan take?

It can take a few days up to a few weeks for your bridging loan application to be approved. Often, you’ll need to have a valuation carried out on your existing home as well as the one you wish to purchase and that can take some time to organise.

The process can be quicker if you are using your existing lender to supply the bridging finance.

Some non-bank lenders offer pre-approval for bridging finance within an hour but as always, you need to read the fine print.

A typical loan term is no longer than 12 months.

Are bridging loans expensive?

Bridging loans can be useful but can also be an expensive way to borrow money.

Depending on the structure of your loan, you may not need to make any loan repayments during the bridging period and the interest is capitalised. The interest will be calculated daily, charged monthly and added to the amount outstanding on your loan. That means you could be paying interest on interest.

People can run into trouble if they fail to sell their home within the loan term – up to 12 months – or if the property value falls during the bridging period.

You don’t want to be pressured into selling for hundreds of thousands of dollars less simply because you’re running out of time. Some loans will have penalties and/or higher interest rates if you don’t sell in time and the lender could step in and sell your property to settle the loan. You’ll need to check the default policy.

In addition to application fees and charges associated with setting up the bridging loan, you may be required to provide a valuation for your existing property and the one you are purchasing.

If you happen to be on a fixed rate home loan and your existing lender doesn’t provide bridging finance, you may need to refinance with a new lender, which could trigger hefty break fees.

Interest rates for bridging loans are much higher than a regular mortgage at around 4-5 per cent, though some are as high as 6 per cent.

A cheaper alternative to bridging finance is a deposit bond, a bit like an IOU for the deposit on the new property instead of stumping up the full lump sum at the outset.

The bond works like an insurance policy to guarantee the vendor that the deposit will be paid in full at the time of settlement. In this case, you pay a one-off deposit bond fee – a percentage of the purchase price. If anything goes wrong, you lose the fee and the vendor still gets paid the full deposit.

Other alternatives include seeking a longer settlement on your new purchase to allow you time to sell your current home, or less common, having a clause added to your purchase contract that says “subject to sale” which means that if you don’t sell your old home, you don’t proceed with your purchase.

How does bridging finance work?

Bridging finance is a short-term loan of up to 12 months to “bridge” the financial gap between buying a new home and receiving the funds from selling your old one.

The loan amount is calculated on the available equity in your current home and most of the bigger lenders recommend you have at least 50 per cent equity – that means that what you owe is no more than half the value of the home.

The bridging loan is usually made up of the amount owing on your current mortgage plus the purchase price of your new property. This is known as your peak debt. For example, if you owe $400,000 on your current loan and purchase a property for $1 million, your peak debt is $1.4 million.

Once your property sells, the sale price less any upfront costs such as stamp duty, agent’s fees and legal fees is subtracted from your peak debt to leave you with your end debt. So if you sold your property for $700,000, and had associated costs of $50,000, your end debt would be $1.4 million minus $650,000, or $750,000.

Your end debt is what your new loan will be worth and it will revert to a regular mortgage.

If you don't hold enough equity in your existing home and your loan to value ratio is above 80 per cent, you may be required to take out Lenders Mortgage Insurance (LMI)

How you make payments during the bridging period depends on the structure of your loan. You might make payments only on your current loan while interest accumulates on your bridging loan and you only pay that back once you sell. In this scenario, because you’re not making payments on the bridging loan, the interest costs can accumulate quickly.

Or it could be that you pay interest only on the bridging loan while still paying your current home loan, leaving you to fund two loans at once.

Another thing to keep in mind is while you can usually make extra repayments on your bridging loan, you generally have no access to a redraw facility during the loan period.

Usually your current lender is best placed to offer bridging finance. But if your existing lender doesn’t offer it, you may need to switch and they may insist on taking on your existing loan. If you’re on a fixed rate this could prove costly.

There are two types of bridging loans:

  1. Closed bridging loans: These loans are used when you have a buyer for your existing property but the settlement dates don’t match up and you won’t receive the funds from your sale in time to pay for your new home. A closed bridging loan covers a set period of time. These can be cheaper than open bridging loans because they are considered less risky.
  2. Open bridging loans: These don’t have an agreed settlement date but are open for up to 12 months. These suit someone who has purchased a new property but hasn’t yet put their existing property on the market or found a buyer yet. If you don’t sell within the term of the loan, penalties apply.

Bridging loans and building

You can take out a bridging loan if you want to stay in your current property while building a new one. It can save the hassle of selling and finding somewhere to rent short-term plus eliminate the stress and cost of having to move twice.

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Where can you get a bridging loan?

Many banks offer bridging loans but some only provide them to existing customers. Credit unions also offer bridging loans to their members while some non-bank lenders offer bridging loans that might look appealing with offers such as the first few months’ interest-free but the interest rate and application fee can be higher than if you went with a traditional lender. Make sure you always check the comparison rates which take into account fees and charges, as well as the product disclosure statement for penalty and default clauses.

Can a broker help with bridging loans?

Buying a new home is likely the biggest purchase you’ll ever make. Buying and selling around the same time can be one of the most stressful times of your life. And having to negotiate the complexities of bridging finance on top of that can add to the load. A mortgage broker can take the headache out of finding the right bridging loan for your personal financial situation at a competitive interest rate.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

What is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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