Bridging Finance

Most property transactions are arranged whereby the sale of your current home and the purchase of your new home happens simultaneously on the one day. It's kinda cool and bizarre how this comes together ‘against the odds’ but invariably it does.

But of course there are circumstances where your dream new home is available for purchase NOW and you haven’t organised your home for sale just yet. So what do you do. You contact the team here at Vault Plus Mortgages – that’s what you do. But of course one option open to you is Bridging Finance.

Consider for one moment that a large part of the money that will help pay for this new dream home is coming from your equity in your current home. And of course this equity is not available for your new home until your current home is SOLD. So if you are looking to buy first (before you sell your current home), then you’re going to need access to some serious bucks aka Bridging Finance.

Bridging Finance by nature is a slightly riskier proposition because there is a point in time where you own two homes (and probably have two home loans) – your current home that you’re going to sell and this new dream home. Furthermore you would have had to borrow 100% of the purchase price of the new home plus also the stamp duty costs. This will be cleared once your current home sells (but the devil is in the timing).

The principal of Bridging Finance is fine if you do your sums properly and make realistic assumptions around the sale expectations of your current home but a word of warning. Bridging Finance can be fraught with danger in a falling or flat property market.

Selling a home in a flat or falling market will invariably see it take much longer to sell and generally achieve a sale price below our initial price expectations so take some serious advice and work through the numbers if this is on the horizon for you.

Bridging Finance is a very technical area – much too intricate to outline here so please tread cautiously and reach out to us here before committing to ‘buying first’ and selling later.

Myth or Fact – to dispel a long held myth, interest rates for Bridging Finance are generally the same as everyday home loan rates, they are not exorbitantly higher as many people think. The negative connotation comes from the fact you are paying home loans on two properties for a period – that’s the killer – not having to pay a ‘penalty interest rate’.

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