Pros and Cons of Bridging Loans
Better Loan Solutions in Mornington Peninsula • Learning Centre • Insights
Better Loan Solutions in Mornington Peninsula • Learning Centre • Insights
Anyone who has sold a property with the intention of upgrading understands the frustration of not knowing whether to sell or buy first.
While there’s no right or wrong answer, there are ways to help mitigate the stress of buying and selling through the use of a bridging loan.
A bridging loan allows you to acquire your next property before selling your current one, streamlining the transition between homes.
However, bridging loans come with their own set of advantages and disadvantages.
Bridging loans typically come with higher interest rates than traditional home loans. Since they are short-term loans, the higher interest rates can significantly impact your overall costs, especially if your existing property doesn't sell quickly.
The short-term nature of bridging loans means that if your current property does not sell within the agreed-upon loan term, you may incur substantial interest charges, putting a financial strain on your budget.
Bridging loans often involve capitalised interest, which can add up quickly, increasing the total debt you'll need to repay upon selling your current property.
Borrowers should be aware of potential fees associated with bridging loans. These may include application fees, valuation fees, and other associated costs.
What you need to consider.
Before taking on a bridging loan, it's vital to think about these different factors:
It’s important to know your chances of success before applying which is where a finance broker can really
help.
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