You've been living in the home you could afford to buy for some time and now you are ready to upgrade and buy the home of your dreams. What happens when you find your perfect home but you haven't sold your existing one? How are you going to finance your purchase?
There are a number of finance options available to you so there shouldn't be any reason why you should miss out on your dream home. Loan arrangements can be made with your lender, which will cover the financing for your new loan when you haven't sold your current property.
One finance option is a bridging loan. In the past, bridging loans were similar to personal loans, with rates that were much higher than standard home loans. They were short-term loans used to cover the deposit on the new home.
Bridging loans are now designed to cover the total financing of the new property, until the buyer sells their existing home and pays off their debt. They are secured by both the existing and new property and have interest rates, which are comparable to variable home loan rates. They can also be short term or longer term loans.
If you are taking out a bridging loan with a new lender, they will take on your existing mortgage and also finance the purchase of your new property. For example, if you owe $300,000 on your existing property and you are buying new property for $600,000 you may be able to borrow up to $900,000.
Security is taken over both your existing property and the new property. You will not be paying interest on $900,000 until you sell your existing property.
Now is the time to move up in the property market and secure your dream home. Interest rates are tipped to remain on hold, and there are plenty of good properties coming onto the market for spring. If you are upgrading at present this is the perfect time, because even if you are taking a little less on your home, you are saving a substantial amount on the upgrade. It can be very stressful purchasing before you sell, and it is not something I am recommending but sometimes it just works out that way. It is important that when you sell your property that you ask your selling agent not to tell prospective buyers that you have already bought, as sometimes that makes you come across as a desperate seller and low offers will start to come your way.
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