Short Term Finance for Bridging Loans: The Lifeline for Property Transactions

Mark Hutchins

Mark Hutchins

Director - Secured Lending

Short Term Finance for Bridging Loans: Unlock Seamless Property Moves

In the fast-paced world of real estate, timing is everything. You might find your dream home, but selling your current one takes time. This can put you in a tricky spot, potentially losing out on the perfect property. Here’s where short term finance for bridging loans comes to the rescue.

This blog dives deep into the world of bridging loans, exploring how they work, their benefits and drawbacks, and how to navigate the process of securing short term finance for your bridging loan needs.

What is a Bridging Loan?

A bridging loan is a short-term financing solution designed to bridge the gap between buying a new property and selling your existing one. It essentially provides you with the funds to secure the new property while you wait for the sale of your current home.

Think of it as a temporary bridge that allows you to move forward with the purchase without your current property sale holding you back. Bridging loans are typically repaid within a short timeframe, ranging from 3 to 18 months, depending on the lender and your specific situation.

How Does Short Term Finance for Bridging Loans Work?

Bridging loans are secured loans, meaning they require collateral to obtain them. In most cases, the collateral used is the equity in your existing property. Lenders will typically offer bridging loans for a percentage of your existing property’s value, often ranging from 65% to 75%.

Here’s a simplified breakdown of the process:

  1. Identify your short term financing needs: Determine the amount you require to cover the down payment and other associated costs of the new property.
  2. Approach lenders: Research and compare different lenders offering bridging loans. Consider factors like interest rates, loan terms, fees, and eligibility criteria.
  3. Apply for the loan: Provide the lender with the necessary documentation, including property valuations, financial statements, and proof of income.
  4. Loan approval and disbursement: Upon approval, the lender will disburse the bridging loan funds, allowing you to proceed with the new property purchase.
  5. Repayment: Once your existing property sells, you use the proceeds to repay the bridging loan with interest.

Benefits of Short Term Finance for Bridging Loans

  • Secure your dream home: Don’t miss out on the perfect property because you haven’t sold your current one. A bridging loan allows you to act fast and secure the new home you desire.
  • Flexibility: Bridging loans offer short-term financing solutions, typically lasting up to 18 months, providing ample time to sell your existing property without undue pressure.
  • Competitive Rates: While interest rates on bridging loans might be slightly higher than traditional mortgages, they can be more competitive than other short-term financing options.

Things to Consider with Short Term Finance for Bridging Loans

  • Higher Interest Rates: Bridging loans come with higher interest rates compared to traditional mortgages due to the short-term nature of the loan and the associated risk for the lender.
  • Repayment Pressure: It’s crucial to ensure you have a realistic plan to sell your existing property within the loan term to avoid potential defaults and financial strain. Unexpected delays in selling your property can lead to expensive extensions on the bridging loan.
  • Exit Strategy is Critical: Consider potential scenarios where selling your existing property takes longer than expected. Having a backup plan in place, such as a line of credit, can help manage the bridging loan repayment if unforeseen circumstances arise.

Exploring Short Term Finance Options for Bridging Loans

Several lenders offer short term finance for bridging loans. Here’s a brief overview of some common options:

  • Traditional Banks: Many banks offer bridging loan products with competitive rates and established application processes. They may require strong creditworthiness and a solid financial history.
  • Specialist Lenders: Non-bank lenders (like Secured Lending) often cater to specific situations and might offer more flexible terms for bridging loans. However, interest rates might be higher compared to traditional banks.
  • Peer-to-Peer Lending Platforms: These platforms connect borrowers with private investors, potentially offering competitive rates but with potentially higher risks. Carefully evaluate the platform’s reputation and terms before proceeding.

Important Tips for Securing Short Term Bridging Loan Finance

  • Shop around: Don’t limit yourself to your primary bank. Compare rates, terms, and fees offered by different lenders, including traditional banks, specialist lenders, and online platforms.
  • Maintain a good credit score: A strong credit score can qualify you for better loan terms and lower interest rates. Focus on improving your credit score well before you plan to apply for a bridging loan.
  • Prepare a solid exit strategy: Don’t underestimate the importance of a realistic plan to sell your existing property. Consider factors like current market conditions, potential delays.
  • Seek professional advice: Consulting with a financial advisor can help you make informed decisions regarding short term bridging loan finance.

Conclusion

Short term finance for bridging loans can be a valuable tool for navigating property transactions. By understanding the process, benefits, and drawbacks, you can leverage this financing solution to secure your dream home while ensuring a smooth transition from your existing property. Remember, thorough research, careful planning, and a well-defined exit strategy are crucial for a successful bridging loan experience.

How can Secured Lending Help?

Every business, even on a growth trajectory, can encounter short-term financial needs. Secured lending emerges as a strategic solution, providing a quick injection of capital to fuel your growth ambitions.

A short term finance for bridging loans play a crucial role in supporting these plans by providing much-needed capital flexibility. By strategically leveraging secured lending, you can overcome short-term financial roadblocks, invest in growth opportunities, and propel your business towards achieving its full potential.

Secured Lending understand the complexities of debt for businesses and the potential benefits of short-term loans. Our experienced team is here to guide you through the process  and helping you explore suitable financing options to address your debt effectively. 

Our loan products are designed to provide short term relief in circumstances where funding is not immediately available from traditional sources of finance, such as banks and other first tier institutions. These include:

We aim to implement our solutions as a matter of priority so that you can resume business as usual, with full control of your company.

If you or your client are in need of finance and need to speak to one of our experts, contact us on 1300 795 175 or email us at info@securedlending.com.au

Short Term Finance for Bridging Loans

Secured Lending

FAST FUNDING SOLUTIONS

Secured Lending focuses on non-conforming, short term funding solutions with incredibly quick turnaround times. So why Secured Lending?
  • We have our own internal property valuation team.
  • We can settle caveats, 1st and 2nd mortgage loans within 24 hours up to $45m.
  • We pride ourselves on being transparent and honest in our approach, always aiming to have an initial assessment back to you in a few hour

Our rates start at 9.95% p.a. with loan terms from 1 – 24 months.

 If you have a scenario to discuss, please call us on 1300 795 175.
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