Perhaps you are building a new home from scratch and need capital to make the down payment to the bank. Alternatively, maybe you have found the perfect home but are still looking for a buyer for your existing residence. In situations such as these, homeowners find themselves in a tricky dilemma. On the one hand, selling your old home will give you the money you need to cover the down payment on the new home. On the other hand, you might still need a place to live for a few months while your new home is under construction or just some extra time to find a buyer. It is common practice to use money from the equity of previous home to make the down payment on a new home, but that option is not always workable.
If you find yourself in a situation where you are ready to buy a new home (or pay to have one built) before you sell your current home, then you will likely consider bridging loans. At Peter Dunn Finance, we provide bridging loan services in Armadale, Fremantle and throughout the Perth metro area. If you think that this type of home to home financing is the right fit for you, then we can help you set up a bridging finance plan. If you are considering a bridge loan but aren’t quite sure that it is the right fit for you, we would also be happy to sit down with you to discuss your options in detail.
Bridging Loans: The Right Fit or a Big Risk?
If you are thinking about getting a bridging loan in Fremantle or South Perth, it is important to assess your options from every angle. Bridging loans can be a godsend when you need to buy a house before you sell your old one. However, bridging loans are also higher risk than home equity loans. Since lenders carry extra risk by carrying bridging loans, this type of financing is also synonymous with higher interest rates.
Bridging loans are risky because they assume certainties in a very uncertain market. If you take out a bridging loan, you are saying that you are certain that your old house will sell within a limited period. You will then use the proceeds of that sale to pay off the bridging loan and assume a more traditional mortgage payment structure with the new home. However, when you take on a bridging loan in South Perth or Armadale, you are also essentially carrying two mortgages at once—one of which has a much higher interest rate. If your old home doesn’t sell relatively quickly, carrying that extra loan payment can become increasingly burdensome. If you are unable to make full payments on your bridge loan interest, those loan repayments can end up eating into your equity to cover the loan.
Chat about Bridging Loans with Perth’s Peter Dunn Finance
Bridging loans can be the right fit for some homeowners, but they can be too risky for others. If you are thinking about applying for a bridging loan in Armadale, Fremantle or anywhere in or around Perth, you should sit down with a professional to weigh the pros and cons. At Peter Dunn Finance, we can tell you more about the interest rates and capitalisation risks of bridging loans. We can also look at your situation—including details about the price of your new home, the value of your old home, your outstanding mortgage amount, your equity amount and your current cash holdings—to advise you on which path to take. Call us on 0427 947 480 if you are interested in scheduling a consultation.