In my last blog I talked about the option of upgrading to a new home. When this is done sometimes the seller buys a new home before their current home is sold. In this case they might need to finance their property purchase using a bridging loan.
A bridging loan is a method used to gain additional finance whilst you wait for your property to sell or settle.
There are two common types of bridging finance loans – open and closed.
An open bridging finance loan is used when you have found your new dream home and have yet to sell your existing home, therefore you don’t have a specific date for when you will get your funds. This type of loan is higher risk because you don’t know when you can expect funds to come in, and it may put you under pressure to sell quicker.
A closed bridging finance loan is generally the better option because in this case you have already sold your existing property however your settlement dates do not match up. In this case you would choose to get a closed bridging loan which is generally considered the better option as there is less risk involved.
If you are interested in the advantages and disadvantages of using a bridging loan there is a great article about it here: www.mortgagechoice.com.au/buying-next-home/next-home-buyers-faqs.aspx