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A bridge to your dream home

Upgrading to your next home is exciting, do you wait until your current home is sold to start house hunting.

Bridging loans – buy before you sell

It’s the conundrum every home owner faces – should you sell your home before buying the next one, or take the risk and sell your old place first? Bridging loans can make the decision easier.

Whether you’re upsizing, downsizing or relocating, making the move to your next home can be exciting! You’ve probably built up some home equity, and for whatever reason, you’re on the lookout for your next home.

The question is, do you wait until your current home is sold to start house hunting? What if you see a place you’d like to buy before your home is sold? You don’t want to miss out on the property but how will you pay for it when all your funds are tied up in your home? And if you sell first, will you rent while you find your next place, incurring the cost of moving twice and potentially breaking a lease early?

Enter bridging loans.

How bridging loans work

As the name suggests, bridging loans act as a bridge that spans the funding gap between buying a new home and selling your current property.

It lets you buy a dream home even if you’re still waiting to find a buyer for your old home.

Better still, bridging loans mean there’s no pressure to sell quickly and accept the first lowball offer that comes along just to access the funds you need.

That said, bridging loans are a type of debt, and before taking on any sort of debt it’s important to weigh up the pros and cons.

Here’s what to consider.

The upsides of bridging loans

Bridging finance offers some real advantages, including:

  • It's a short term debt


  • Bridging loans are designed to give you breathing space for a temporary situation. Your home will sell at some stage, even if you can’t exactly say when.

    That’s why bridging loans usually last for a set period. Community First offers up to 12 months from the date of settlement of your new property to repay your Community First Bridging Loan.

    This is likely to be ample time to sell your old home.

  • You don’t have to miss out on an ideal property


  • Sometimes we come across a home that is perfect for our needs. It may be the right location, a great price or exactly the design you were looking for – or a combination of all three.

    Using a bridging loan means your dream home doesn’t have to be ‘the one that got away’.

  • No need to make monthly repayments

  • Lenders each have their own approach to bridging loans, but at Community First our bridging loans work in a way that minimises any stress on your cash flow.

    Our bridging loans are interest-only, and unlike some banks, we don’t ask you to make repayments during the bridging loan period. Instead, we deduct the value of the accrued interest from the sale proceeds of your current home.

  • You can minimise moving costs


  • A bridging loan means you only have to wear the cost (and hassle) of moving once. On the other hand, if you sell before buying elsewhere, you could be up for rent on temporary accommodation, and have the added expense of moving furniture twice.

    The downsides of bridging loans

    Bridging loans can have drawbacks:

    The interest rate is generally higher

    As a rule, the interest rate on a bridging loan is higher than for a traditional home loan.

    However, as bridging loans are very short term (12 months or less), this helps to keep a lid on the interest cost. And your home could sell a lot sooner than anticipated, which can minimise the cost.

    Even so, the accrued loan interest will eat into the sale proceeds of your home.

    Your existing home may not sell in time or it could sell for less than your bridging loan

    The two unknowns when you list a home for sale are the time taken for a buyer to come along, and the final sale price.

    Both should be considered if you’re thinking of bridging finance.

    Right now, the property market is generally strong in most parts of Australia.

    CoreLogic says capital city homes are taking a median of 27 days to sell 1 . That’s very quick – and well within the 12-month timeframe offered by Community First’s Bridging Loan.

    The other factor, the final sale price of your home, is less certain. That makes it important to crunch the numbers to be sure the cost of a bridging loan won’t be the make or break factor that could make it hard for you to finance your new home.

    For more information on Bridging Loans we have another article on our website for you to read, just click here for the link.

    To Learn more about Community First's Bridging Loan - and if it is the right choice for you – call the Community First team on 1300 13 22 77, or visit one of our Community First stores.


    1
    https://www.corelogic.com.au/__data/assets/pdf_file/0015/22533/CoreLogic-HVI-MAY-2024-FINAL.pdf

    Community First Credit Union LimitedABN 80 087 649 938 | Operating as Community First Bank | AFSL and Australian credit licence 231204| BSB 512-170