How to Use Bridging Loans for Auction Property Purchases

Understanding Bridging Finance for Auction Properties

When you find your dream home at auction, timing is everything. Auction properties require settlement within 30 to 90 days, which often doesn't align with selling your current property. This is where bridging finance becomes a valuable solution. A bridging loan provides temporary finance that allows you to buy before you sell, giving you the financial flexibility to act quickly when opportunities arise.

For pharmacy assistants working in the healthcare sector, bridging finance offers a practical way to secure a property at auction without the pressure of selling your existing home first. This short term property finance creates a bridge between purchasing your new property and selling your current one.

What Makes Bridging Loans Suitable for Auctions

Auction finance differs from traditional home loans because of the speed required. When the hammer falls, you typically have just 30 days to settle. Standard loan approvals can take weeks, but bridging loan approval can be processed much faster, making them ideal for urgent finance situations.

Key features of bridging loans include:

• Fast approval processes designed for time-sensitive purchases
• Short term loan periods, typically ranging from 6 month bridging to 12 month bridging arrangements
• Flexible bridging loan repayment structures
• The ability to use your existing property as bridging loan security

How Bridging Finance Works for Property Purchases

The bridging loan amount is calculated based on the value of both properties - the one you're buying and the one you're selling. Lenders assess the loan to value ratio (LVR) across both properties, and the bridging loan LVR typically sits at 80% or less of the combined property values.

During the bridging period, you'll need an exit strategy. This usually involves selling your existing property to repay the bridge loan. Most lenders require evidence of your sell property exit plan, such as an exchange contract with a buyer or active marketing of your property.

Interest Capitalisation and Bridging Finance Costs

One of the unique features of bridging loans is capitalised interest. Rather than making monthly repayments during the temporary finance period, the interest is added to the loan balance. This means you won't face dual mortgage repayments while managing both properties.

However, you should understand the bridging finance costs involved:

• Bridging loan interest rate charges (typically higher than standard variable interest rate products)
• Bridging loan fees including establishment and ongoing costs
• Exit fees when you finalise the bridging loan settlement
• Valuation and legal costs

The bridging loan interest rate varies between lenders, which is why accessing loan options from banks and lenders across Australia through a specialist broker can help you find suitable terms.

The Bridging Finance Application Process

The bridging loan application requires documentation for both properties. You'll need to provide:

1. Proof of income and employment
2. Details of your current property and its estimated value
3. Information about the property you're purchasing
4. Your exit strategy and timeline for selling
5. Standard identification and financial documents

As pharmacy assistants often have stable employment in the healthcare sector, this can work favourably during the bridging finance application process. Lenders view healthcare professionals positively, which may assist with fast approval.

Benefits of Using Bridging Finance for Auctions

The bridging loan benefits for auction purchases are substantial:

• Buy before you sell: Purchase your new property without waiting for your current home to sell
• Seamless property upgrade: Move into your new home and prepare your old property for sale without time pressure
• Competitive bidding: Enter auctions with confidence knowing your finance is arranged
• Avoid selling first: No need to rush into selling at a lower price or arrange temporary accommodation
• Buy dream home: Act quickly when the right property becomes available

Understanding Bridging Loan Risks

While bridging finance offers significant advantages, you should be aware of bridging loan risks:

• Higher interest costs during the bridging loan term
• Financial pressure if your existing property doesn't sell within the expected timeframe
• Potential for negative equity if property values decline
• The need to manage two properties simultaneously

Careful planning and realistic expectations about your property sale timeline can help mitigate these risks.

Alternatives to Consider

Before committing to bridging finance, consider bridging loan alternative options:

• Equity release loans to access funds from your current property
• Selling your existing property before purchasing
• Seeking an extended settlement period from the vendor
• Using savings or other liquid assets

When Bridging Loans Make Sense

Bridging finance is particularly suitable when:

• You've found an auction property that meets your needs
• Your current property has substantial equity
• You have a realistic exit strategy for selling
• The short term property finance costs are manageable within your budget
• You want to avoid the uncertainty of selling after buying

For pharmacy assistants looking at buying your next home, bridging finance can provide the flexibility needed to upgrade without compromise.

Getting Professional Advice

Working with a specialist mortgage broker who understands bridging loans for pharmacists and healthcare professionals can make a significant difference. They can help you:

• Compare loan amount options and bridging loan term structures
• Access interest rate discounts where available
• Navigate the bridging loan settlement process
• Understand all bridging loan fees upfront
• Plan your exit strategy effectively

At Pharmacist Home Loans, we specialise in helping pharmacy professionals, including pharmacy assistants, access appropriate finance solutions. Whether you're considering bridging finance for an auction property or exploring other home loans for pharmacists, our team understands your unique circumstances.

Bridging finance can be a powerful tool for securing auction properties quickly, allowing you to buy before you sell and transition between homes smoothly. With proper planning and professional guidance, you can use this short term loan option to secure your next property with confidence.

Ready to explore how bridging finance could work for your auction property purchase? Call one of our team or book an appointment at a time that works for you to discuss your property goals and finance options.