Bridge the gap between buying a new property and selling your existing one

A bridging loan is a short-term loan designed to help borrowers transition between buying a new property and selling their existing one. It provides temporary financing, ensuring you have the funds to purchase a new home before receiving the proceeds from your current property’s sale.

In Perth but more widely in Australia too, homeowners wanting to move home are finding it very difficult to buy their next home without already having committed to selling their existing home.

This proposition for a family with pets and a lack of rentals available, selling before having found a property to move to, let alone getting their offer accepted ahead of all the other buyers is too much of a risk for disruption to life and possible financial costs, let alone a risk of becoming homeless!

The problem with a subject to sale clause is that the seller will not want to wait for the buyer to sell their home and adds risk of the contract falling over with the seller not having any certainty the sale will go through.

In a sellers market, the answer lies in bridging finance which many clients have been turning to, to allow their offer to purchase not relying on a subject to sale clause on their contract (which are being mostly overlooked in favour of simpler finance only clauses).

Total Choice Home Loans can assist to ascertain if you are able to access this type of loan and then select the best option from the varied options in the market.

Pros of a Bridging Loan:

✅ Allows you to buy before selling – Avoids the pressure of selling quickly and gives you time to find the right buyer.
✅ Prevents the need for temporary housing – You can move straight into your new home without renting in between.
✅ Covers cash flow gaps – Ensures you have funds available for your next property purchase.
✅ Interest-only repayments (in some cases) – Many lenders allow interest-only payments during the bridging period, reducing financial strain.

Cons of a Bridging Loan:

❌ Higher interest rates – Typically more expensive than standard home loans, especially if the loan term extends.
❌ Increased financial risk – If your existing property doesn’t sell quickly, you could end up paying interest on two loans.
❌ Limited availability and strict conditions – Some lenders have strict eligibility criteria, requiring proof of sale within a set timeframe.
❌ Potential for negative equity – If your old property sells for less than expected, you could owe more than planned.

Is a Bridging Loan Right for You?

A bridging loan can be a great solution if you're confident in selling your existing property within a short timeframe and need the flexibility to buy before selling. However, it’s crucial to assess the risks, including potential market downturns and higher interest costs.