As a pharmacy assistant looking to invest in development opportunities, you may find yourself in a position where you've identified the perfect development site but haven't yet sold your existing property. This is where bridging loans become an invaluable financial tool, allowing you to bridge the gap between purchasing your new investment and selling your current home.
Understanding Bridging Finance for Development Sites
Bridging finance is a short-term loan solution that helps you purchase a development site temporarily while you arrange permanent funding or sell your existing property. These loans typically have a loan term of 6 to 12 months if you're selling your existing property, or up to 12 months if the new property is being built.
For pharmacy assistants considering development investments, bridging loans offer the flexibility to act quickly in competitive property markets. The loan amount is calculated based on your borrowing capacity and the combined value of both properties.
Key Components of Bridging Loan Structure
When applying for a bridging loan, lenders will assess several crucial elements:
• Peak Debt: This represents the maximum loan amount you'll owe, including the contract purchase price of the new home plus your existing mortgage balance
• End Debt: The remaining loan balance after selling your current property
• Loan to Value Ratio (LVR): Most lenders require an LVR of 80% or less to avoid lenders mortgage insurance (LMI)
• Interest Capitalisation: Many bridging loans allow you to capitalise interest payments, reducing immediate financial pressure
Should You Buy or Sell First?
This common dilemma affects many property investors, including pharmacy assistants. Bridging finance eliminates the need to choose, allowing you to:
- Secure your development site without delay
- Avoid temporary accommodation costs
- Take time to achieve optimal sale prices for your existing property
- Reduce the stress of coordinating settlement dates
Interest Rates and Loan Options
Bridging loan rates are typically higher than standard home loan interest rates, reflecting their short-term nature and increased flexibility. You'll encounter both variable interest rate and fixed interest rate options:
• Variable loan rates: These fluctuate with market conditions and may offer interest rate discounts for professional occupations
• Fixed interest rate loans: Provide certainty for calculating bridging loan repayments throughout the loan term
Many lenders also offer offset account facilities, helping to reduce the overall loan interest rate by offsetting your savings against the loan balance.
The Application Process
Mortgage brokers can help you access bridging loan options from banks and lenders across Australia, streamlining the application process. The loan application typically requires:
• Recent bank statements
• Property valuations for both existing and new properties
• Evidence of your ability to service the peak debt
• Details of your financial situation and employment as a pharmacy assistant
Getting Pre-Approved
Securing loan pre-approval before house hunting provides several advantages. Getting pre-approved helps you:
- Understand your exact borrowing capacity
- Move quickly when suitable development sites become available
- Negotiate with confidence
- Avoid disappointment from unsuccessful applications
Managing Stamp Duty Considerations
When purchasing development sites, stamp duty represents a significant upfront cost. Some states offer concessions for certain types of development projects, and your mortgage broker can help you understand how these costs impact your overall financial situation.
Working with Local Property Markets
Pharmacy assistants often have valuable insights into local property market conditions through their community connections. This knowledge proves invaluable when selecting development sites and timing your property transactions.
Investment Loan vs Home Loan Considerations
Development site purchases typically fall under investment loan criteria, which may have different interest rates and lending requirements compared to owner-occupier home loans. Your mortgage broker will help structure the most appropriate loan for your specific circumstances.
Calculating Your Repayments
Calculating bridging loan repayments involves considering both the interest costs and the temporary nature of the facility. Many borrowers choose interest-only repayments during the bridging period, with some opting for interest capitalisation to preserve cash flow.
Remember that bridging finance is designed as a short-term solution. Having a clear exit strategy, whether through property sale or refinancing to permanent funding, is essential for successful property development ventures.
Bridging loans provide pharmacy assistants with the financial flexibility to pursue development opportunities without being constrained by the timing of property sales. By working with experienced mortgage brokers, you can access competitive bridging loan options tailored to your professional circumstances and investment goals.
Call one of our team or book an appointment at a time that works for you to discuss how bridging finance can support your property development aspirations.
