A bridging loan gives you the flexibility to purchase a new property before you’ve sold your existing property. In a competitive market this could be the difference between purchasing the ideal property or missing out due to timing.
Benefits
It can take the stress out of having to align your property settlement dates, to give you more control.
This type of loan can be helpful if you are unable to take on two home loans at the same time. It can also boost your borrowing power by allowing you to borrow up to 100% of the purchase price (conditions apply)
Risks
Interest is calculated daily and charged monthly, which means the longer it takes you to sell your current property, the more interest you will pay.
You may end up selling your home for less than you expected, which may leave you with a higher home loan balance than planned.
If you can’t sell your current property within the 12-month timeframe from the day your bridging loan is funded, the bank may consider this a default and step in to assist with the sale of the property.
In the event of a default, you can lose your property and you may still owe the bank money.