One of the biggest hassles with buying and selling homes is that the timelines very rarely line up perfectly. Sometimes, you will find a buyer for your current home before you find a new house where you want to live. Other times, you will locate your dream home before selling your current residence. In the latter situation, you essentially have two choices: wait for someone to make an offer on your house (and risk losing your dream home to another buyer) or jump at the opportunity and buy your dream home before you have sold your current one.

How Bridge Loans Work

If you opt for the latter option—buying a new house before you have succeeded at selling your current house—you will likely be looking for bridging finance in the Perth area. Bridging finance—also known as ‘home to home loans’ or simply as ‘bridge loans’—helps to ‘bridge the gap’ between your mortgage on a new home and the full sale price.

Think of it this way: Typically, when a homeowner is looking to buy a new house and sell their old one, their goal is to use the money from the sale of the first house for the down payment on the second house. If you decide to buy a new house before you have sold your old one, then you won’t have the same amount of cash on hand to make the down payment. Perhaps you have some money saved up that you intend to use for the mortgage on the new house, but not enough to cover the full down payment. Maybe you are planning on paying the entire down payment with money from selling the first house.

In either case, pursuing bridging finance in Armadale or Fremantle would be an option worth considering if you ended up wanting to buy a new home before selling the old one. A bridge loan is a second home purchase loan—one that exists entirely separate from the mortgage. Say you are purchasing a $180,000 house and want to pay a 20% down payment on the mortgage. Your down payment amount would be $36,000, while your mortgage loan amount would be $144,000. Selling your old home—and liquidating the equity you held in the home—would likely cover some or even all your down payment. If you hadn’t sold your house yet, a bridge loan might be able to help you temporarily cover the down payment. You would then pay back the bridge loan—plus interest—when your home does sell.

Though loans can vary from person to person, bridging finance usually either rolls the mortgage of your two homes together or acts as a second mortgage on the first house to pay the down payment of the second. Sometimes, the loan will use some of your equity from the first house to purchase equity in the new house.

Finding Bridging Finance in Fremantle, Armadale or South Perth

If you are looking for bridging finance in South Perth, Fremantle, Armadale or anywhere in the Perth metropolitan area, Peter Dunn Finance might be able to help. We can advise you on the pros and cons of home to home loans and assist you in determining whether a bridging finance plan is right for you. To find out more, give us a call on 0427 947 480.