When to Consider Emergency Property Purchase Funding

As a painter, you know timing is everything. Whether you're finishing a job before the weather turns or completing a project before a deadline, getting the timing right makes all the difference. The same principle applies when you're buying or selling property – but sometimes the timing just doesn't work out as planned.

That's where bridging finance comes in. This short-term funding solution can bridge the gap between buying your new home and selling your existing one, giving you the flexibility to move when the right opportunity presents itself.

What is Bridging Finance?

Bridging finance is essentially a short-term loan that helps you purchase a new property before you've sold your current one. Think of it as a financial stopgap that prevents you from missing out on your dream home whilst you're waiting for your existing property to sell.

These loans typically run for 6 to 12 months, giving you enough time to sell your existing property. If you're building a new home, the loan term can extend to 12 months to account for construction timeframes.

How Does a Bridging Loan Work?

When you take out bridging finance, you'll have two debt levels to consider:

• Peak Debt: This is the total amount you owe when you're carrying both properties – your existing home loan plus the bridging loan for your new purchase
• End Debt: This is what you'll owe after selling your original property and paying down the bridging component

The loan amount is calculated based on the contract purchase price of the new home, minus any deposit you can contribute. Your borrowing capacity will depend on your ability to service both loans during the bridging period.

Should You Buy or Sell First?

This is one of the most common dilemmas facing property buyers, especially painters who might be self-employed or working on varying contract schedules. Here are some scenarios where bridging finance makes sense:

• You've found the perfect property but haven't sold your current home
• The local property market is moving quickly and you can't risk losing your chosen property
• You need to secure accommodation in a specific area for work reasons
• Selling first would mean temporary accommodation and double moving costs

Understanding Bridging Loan Rates and Costs

Bridging loans typically come with higher interest rates than standard home loans due to their short-term nature and higher risk profile. You'll generally encounter variable interest rate options, though some lenders may offer fixed interest rate loans for the bridging period.

Additional costs to consider include:

• Stamp duty on your new property purchase
• Lenders mortgage insurance (LMI) if your loan to value ratio (LVR) exceeds 80%
• Legal and conveyancing fees for both properties
• Real estate agent fees when selling
• Interest capitalisation during the bridging period

Some lenders offer interest rate discounts if you're an existing customer or meet certain criteria. An offset account linked to your bridging loan can help reduce interest costs by offsetting your savings against the loan balance.

The Application Process

Applying for a bridging loan involves a streamlined application process, though lenders will still assess your financial situation thoroughly. You'll typically need to provide:

• Bank statements showing your financial position
• Evidence of income (particularly important for painters who may have irregular income)
• Property valuations for both your existing and proposed properties
• Sales contracts and purchase agreements
• Details of your existing home loan

At Tradie Home Loans, we can help you access bridging loan options from banks and lenders across Australia. Our team understands the unique challenges painters face with income documentation and can guide you through the application process.

Getting Pre-Approved

Loan pre-approval for bridging finance can give you confidence when making offers on properties. This process involves a lender assessing your borrowing capacity and providing conditional approval before you find a specific property.

Pre-approval is particularly valuable in competitive property markets where sellers favour buyers who can demonstrate their financial capacity to complete the purchase.

Calculating Bridging Loan Repayments

Most bridging loans are structured as interest-only during the bridging period, which helps keep repayments manageable whilst you're carrying two properties. The loan interest rate and loan amount will determine your monthly repayments.

Some lenders offer interest capitalisation, where the interest is added to the loan balance rather than requiring monthly payments. This can help with cash flow but increases the total amount you'll need to repay.

Is Bridging Finance Right for You?

Bridging finance can be a valuable tool for painters looking to upgrade their living situation or move for work opportunities. However, it's not suitable for everyone. Consider bridging finance if:

• You have sufficient income to service both loans temporarily
• Your existing property is likely to sell within the loan term
• You've found a property that meets your specific needs
• The costs of bridging finance are justified by the benefits

For painters considering their first property purchase, you might want to explore buying your first home options or investigate your borrowing capacity before committing to bridging finance.

Remember, bridging finance is designed as a short-term solution. If you're unable to sell your existing property within the loan term, you may face penalty interest rates or be required to refinance to a standard investment loan.

Bridging finance can provide the flexibility you need to secure your next property without the stress of timing constraints. However, it's crucial to understand all costs involved and ensure you can comfortably manage the repayments during the bridging period.

Call one of our team or book an appointment at a time that works for you to discuss whether bridging finance aligns with your property goals and financial situation.