What is Bridging Finance?
Bridging finance is a kind of loan that enables homeowners to buy a new home before selling the existing one. Sometimes a short term refinancing option is needed to save clients equity.
What kinds of bridging finance are available?
There are 3 types of bridging finance:
'Open Ended' bridging finance, which means that the existing property has not been put on the market so its sale date is unknown. Main banks will support this type of financing, provided applicants can prove their ability to service the debt, the loan to value ratio meets the requirements, and applicants have a clean credit history.
'Closed' bridging finance means that the existing home is 'unconditionally sold but settlement date is after the settlement date of the new home purchase. This gives a finite term that finance will be required. Banks prefer this situation because it is less risky. If a bank declines an application, we have access to a number of other financial solutions.
'Clean up' bridging finance suits clients that have adverse features in their applications. It can also be used to 'buy time' to prevent the existing lender foreclosing and carrying out a mortgagee sale.