Your 5-Minute Guide to Bridge Loans: When & How to Use Them
Found your dream home but haven’t sold your current one? Don’t stress; we can help you secure your new home while your old one is still on the market.
Forget waiting for an offer on your current place or stalling until settlement to start searing for a new home. With a bridge loan, you can buy your dream house before your old one sells- without mortgaging your soul to do so.
Settle into your new home with our quick guide to bridging finance, loans, and bridging financing. Or how you can get into your new dream home while your old one is still on the market. So what is a bridge loan, and how exactly does it help?
In a nutshell, bridge finance or bridge loans offer a short-term solution designed to help you buy now, knowing you can pay later – i.e. we know your house will sell, so we’ll loan you this money now. In this 5-minute guide, we will delve into the world of bridge loans, their benefits, and how you can use them to your advantage.
Bridging Finance: Bridging the Gap for Your Real Estate Needs
Bridge finance, often called a bridging loan, provides short-term financial aid or money for regular folk to ‘bridge’ the gap when buying a new home or starting a new construction project.
Basically, it’s a loan that bridges the gap between you needing money to buy now while your old house awaits its new owner or you are staying in your existing home during a build.
At Crester, we take bridging financing to a new level by offering customisable shortfall bridge loans ranging from $5,000 to $2,000,000 NZD. Our loan solutions are backed by the New Zealand Lending Code regulations and have a flexible payment plan duration.
Lasting between one to twelve months to ensure your repayments fit comfortably into your financial situation- we don’t want you eating ramen noodles for months to survive any more than you do.
When to Use Bridge Finance
Bridge finance can be a great tool for lots of different situations:
- Assisting with home mortgage repayments while your current property is on the market.
- Purchasing, fixing, and reinsuring “As is Where is” properties.
- Covering property development costs until the property is sold.
- Making a deposit on a new home when building off the plan.
- Bridging funds to make cash offers while waiting for bank finance approval on an investment property.
- Buying a new car with financing while waiting to sell your existing one.
Pretty much any situation when you know you’ve got money coming but need access to it now.
If you’re experiencing a temporary cash crunch, Crester’s finance for bridging can provide the solution. We strive to be the financial partner who helps you make prompt decisions that are tailored to your situation. As Kiwis, we built Crester Credit to support you when needed and make it as wallet-friendly as possible – hello, low fees.
Maximising Benefits with Bridge Loans
To make the most of your bridge loan, it’s worth taking into account:
1. Expect More: Always calculate that you’ll need the money longer than you think. Consider the worst-case scenario when planning for a bridging loan.
2. Security of the Deal: Understand that any lender offering bridge funding will use your asset (like a property) as security. If things go wrong, the lender could enforce rights to the property to recoup their money – i.e. if you don’t pay it back, you may lose the asset.
3. Surprise Costs: Assume unexpected costs and additional delays, especially when renovating a property. We recommend starting with a 15% contingency factor.
4. Delayed Settlement: If you’re using Crester’s bridge loan services to buy a new property before selling your existing one, consider asking the real estate agent for a delayed settlement to reduce the borrowing period.
5. Choose the Right Partner: Short-term bridge funding can be tempting, but it’s crucial to find the right finance partner and thoroughly read the fine print. At Crester, we pride ourselves on our transparency around fees, interest rates, and additional charges for defaulting or late repayments.
6. Timing: If you’re buying your dream home, timing your property sale is crucial to get maximum results. Consider the timing and your bridge finance to ensure the best outcome.
Frequently Asked Questions About Bridge Financing
What is bridge financing? A short-term loan that helps you cover the financial gap between purchasing a new property or oversized item and selling your current property. Sometimes also referred to as a bride loan or bridge finance.
- How does bridge Finance work? It provides you with the necessary funds to purchase a new property before selling your current one. Once your existing property is sold, the proceeds are used to repay the bridge finance. See above for other uses, but most commonly, it relates to property.
- How long does bridging financing last? It is typically short-term, usually between six months to one year, but the duration can vary based on your circumstances. We work with you to determine the length of time that suits your situation best.
- Can I repay the loan early? Absolutely! If you sell your existing property before the end of the loan term, you can repay the loan early. Just make sure to discuss this at the time you take out the loan, as loans can vary.
The Crester Bridge Finance Advantage
Crester’s bridge financing solution offers speed and ease. We understand the urgency and stress that often accompany these high-pressure situations. Our Bridge loans are designed to remove some of the pressure because we get it; selling is stressful enough. Once your bridge finance is approved, the cash could be in your account within 24 hours.
Competitive rates are a significant advantage of opting for Crester’s loans when wanting to bridge the gap. Our annual rates can be as low as 12% depending on your loan size, making our offerings some of the most competitive in the market. As a Kiwi-owned company, we are dedicated to giving you a fair deal regarding finance and being responsible lenders. All our loans are in line with the responsible lending code of New Zealand, and the terms and conditions are clearly laid out—no nasty surprises here!
To further simplify the process, we offer a bridge loan calculator. This tool will give you a clear understanding of how much you should borrow and what repayments you can afford.
In essence, bridging finance can be invaluable in the right circumstances. If you think a loan to bridge the gap might be right for you, Crester is here to help you navigate the process easily and transparently. Connect with us today to explore your options.
by Ash Horton
June 29, 2023
Ash is a professional content writer with extensive experience in business development in the financial services. Ash has founded businesses from the age of 19, including franchising ventures, and working alongside some of the largest retailers in the world.
