How does bridging finance work in Australia?
A bridging loan is typically an additional loan – one you take out on top of your existing home loan. This means during the “bridging period” while you’re trying to sell your old property, you have two loans and are generally being charged interest on both of them.
What is the interest rate on a bridging loan in Australia?
Find and compare bridging home loans
| Product Bridging Home Loan | Advertised Rate 4.16 % p.a Variable | Comparison Rate* 4.20 % p.a |
|---|---|---|
| Product Bridging Home Loan | Advertised Rate 5.29 % p.a Variable | Comparison Rate* 5.37 % p.a |
| Product Bridging Home Loan | Advertised Rate 5.29 % p.a Variable | Comparison Rate* 5.37 % p.a |
How risky is a bridging loan?
One of the most significant risks of bridging loans is that they are very expensive. Because they are designed to be short-term and for large amounts of money, lenders will be expecting large returns over a short period of time.
How much equity do I need for a bridging loan?
To qualify for the bridging loan, you need 20% of the peak debt or $187,000 in cash or equity. You have $300,000 available in equity in your existing property so, in this example, you have enough to cover the 20% deposit to meet the requirements of the bridging loan.
How much deposit do I need for bridging loan?
Deposit requirements for residential bridging loans are usually higher than they are for mortgages. The minimum a lender would usually expect you to put down is 30-35% of the property’s value.
Why are bridging loans bad?
Bridging finance is a form of short-term borrowing that is usually much quicker to arrange than a mortgage. Bridge loans are typically more flexible than the alternatives too, but their main drawback is that the interest rates can be higher than mortgages.
Is a bridging loan expensive?
Bridging loans are priced monthly, rather than annually, because people tend to take them out for a short period. One of the major downsides of a bridging loan is that they are quite expensive: you could face fees of between 0.5% and 1.5% per month. That makes them much pricier than a normal residential mortgage.