Bridging Home Loan

April 15, 2012 by  Filed under: Loans 

In a perfect world, homeowners would decide they’d like a new house, put their home on the market, find a new home they love, find a buyer for the home they currently live in and breathe a sigh of relief as the stars align, the timing works perfectly and they enjoy a smooth process. Unfortunately, things don’t always work this way. So what happens when you find the perfect new home but you haven’t found a buyer for your exiting home? Most people can’t afford to cover two mortgage payments so what can you do? The solution for many is a Bridging Home Loan.

What Is It?

Lenders understand that the home-buying process is a complex one that can include bumps in the road and many offer this temporary solution, which allows you to purchase a new property before the sale of your existing one. The way it works is that the lender provides financial cover for both properties until the sales are finalized on both sides. This type of financing can be used if you are planning to buy an existing house or if you’re building a new one.

Things to Consider

In order to find the product that is right for you, you’ll need to consider a few factors:

– How long will you need the funds?
– Do you have a contract on the property you’re selling?
– Is the new home an existing property or is it being built?
– Are you able to make payments on your existing mortgage and the bridge?

Once you get an idea of what you’ll be looking for and what you’ll be able to afford, consult with your lender to discuss your options.


Financial products vary among lenders but some lenders allow up to 6 months if you are purchasing an existing home and up to 12 months if you are building a new home. Make sure to understand the limits and know what will happen if you don’t close both deals before the deadline.

Capitalizing the Interest

Some lenders give borrowers the option of the capitalizing the interest on the bridging home loan. What this option does is to allow the borrower to defer payments on the new property during the bridging period. Instead, the interest accumulated during this period is added to the financing on the new property. This might lead to higher payments in the future but it will help borrowers avoid double payments while they are still in the process of selling their existing home.

In addition, any money made from the sale of the first property will be applied to the capitalized interest credit. Any remaining debt will be what you owe on your new home.

Tomorrow Finance compares hundreds of home loans from Australia’s best home loan lenders. Their home loan comparison software can find out how much you can save by getting the best home loan rates.

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