When to Use Bridging Finance Between Property Sales

What is Bridging Finance?

Bridging finance is a short term loan designed to help you buy before you sell. For research pharmacists looking to upgrade their home or relocate, bridging loans provide temporary finance that covers the gap between purchasing your new property and selling your existing one.

This type of bridge loan allows you to secure your dream home without the pressure to sell your current property first. The bridging loan amount is typically secured against both your existing property and the new property you're purchasing.

How Bridging Loans Work

When you take out bridging finance, you're essentially borrowing against the equity in your current home. The loan covers the purchase price of your new property while you continue to own and eventually sell your existing home.

The typical process involves:

1. Apply for bridging finance through a specialist mortgage broker
2. Secure bridging loan approval based on both properties
3. Complete bridging loan settlement on your new property
4. Move into your new home
5. Sell your existing property during the bridging period
6. Use sale proceeds for bridging loan repayment

Most lenders offer a 6 month bridging or 12 month bridging loan term, giving you adequate time to sell property exit without rushing the sale.

Understanding Bridging Loan Costs

Bridging finance costs include several components that research pharmacists should understand before proceeding:

Interest Charges: The bridging loan interest rate is typically higher than standard variable interest rate home loans. However, many lenders allow interest capitalisation, meaning you don't need to make monthly repayments during the bridging period. Instead, the interest is added to the loan amount.

Bridging Loan Fees: These may include application fees, valuation fees for both properties, legal fees, and discharge fees. Understanding the complete fee structure helps you plan your temporary finance period effectively.

Bridging Finance Application Costs: Some lenders charge for processing your bridging finance application, though these fees can sometimes be added to the loan amount rather than paid upfront.

Bridging Loan LVR Requirements

The loan to value ratio (LVR) for bridging finance is calculated differently than standard home loans. Lenders assess the combined value of both your existing property and the new property you're purchasing.

Typically, lenders require:

• LVR of 80% or less across both properties for fast approval
• Strong serviceability to cover potential interest on both loans
• Clear exit strategy showing how you'll repay the bridge loan

For research pharmacists with established equity in their current home, meeting these bridging loan security requirements is often achievable. Our team can access loan options from banks and lenders across Australia to find suitable bridging finance solutions.

Benefits of Bridging Finance

Using a bridging loan offers several advantages for research pharmacists:

Avoid Selling First: You don't need to sell your home before buying, which means you can avoid temporary rental accommodation or moving twice.

Seamless Property Upgrade: Bridge loan buying allows you to move directly from your current home to your new one, maintaining continuity for your family.

Auction Finance: Quick bridging finance provides the certainty needed to bid at auctions, where unconditional offers are required.

Buy Dream Home: When you find the perfect property, you won't miss out while waiting to sell your current home. This is particularly valuable in areas where suitable properties are limited.

No Rush to Sell: Selling after buying means you can take time to present your property well and wait for the right offer, potentially achieving a higher sale price.

Bridging Loan Risks to Consider

While bridging loans provide flexibility, research pharmacists should understand the potential risks:

• Market Changes: If property values decline during the bridging period, you may face challenges with loan to value ratio requirements
• Extended Sale Period: If your property doesn't sell within the bridging loan term, you may need to seek a bridging loan refinance or extension
• Carrying Costs: Even with capitalised interest, you're responsible for maintaining both properties and meeting all loan obligations
• Sale Price Risk: If your property sells for less than expected, you may need additional funds to complete bridging loan repayment

Alternative Options to Bridging Finance

Depending on your circumstances, you might consider these bridging loan alternative options:

• Sale Contingent Contracts: Some sellers accept exchange contract terms that depend on your property selling first
• Equity Release: Using equity release loans from your existing property to fund the deposit on your new home
• Construction Loans: If building rather than buying, construction loans provide staged finance
• Home Loan Refinancing: Refinancing your existing loan to release equity before purchasing

Each option has different implications for timing, costs, and approval requirements.

Who Should Consider Bridging Finance?

Bridging loans are particularly suitable for research pharmacists who:

• Have substantial equity in their current property (typically 20% or more)
• Need urgent finance to secure a specific property
• Want to avoid the inconvenience of temporary accommodation
• Are confident their property will sell within the bridging loan term
• Have stable income to service both loans if required
• Require auction finance to compete at property auctions

The Application Process

Securing bridging loan approval typically involves:

1. Initial Assessment: Review your equity position and borrowing capacity
2. Documentation: Provide evidence of income, current loans, and property valuations
3. Bridging Finance Application: Submit application with detailed exit strategy
4. Valuation: Both properties are valued to determine bridging loan security
5. Approval: Receive conditional then formal bridging loan approval
6. Settlement: Complete bridging loan settlement and purchase your new home

Working with experienced mortgage brokers who understand the pharmaceutical sector can expedite this process. We regularly assist research pharmacists with short term property finance needs and can guide you through each stage.

Planning Your Exit Strategy

A clear exit strategy is essential for bridging loan approval. Your plan should outline:

• Realistic timeline for listing and selling your property
• Expected sale price based on recent comparable sales
• Marketing strategy for your property
• Contingency plans if the property doesn't sell within the temporary finance period
• Alternative repayment sources if needed

Lenders want confidence that you can complete bridging loan repayment within the agreed bridging loan term, making a well-documented exit strategy crucial.

Making Your Decision

Bridging finance can be a powerful tool when you need to buy before you sell, offering flexibility and opportunity during your property upgrade journey. However, it's important to fully understand the bridging finance costs, interest rate implications, and potential risks before proceeding.

Research pharmacists considering bridging loans should carefully assess their financial position, property sale prospects, and alternative financing options. The right decision depends on your specific circumstances, property market conditions, and long-term financial goals.

Call one of our team or book an appointment at a time that works for you. We specialise in helping research pharmacists access loan options from banks and lenders across Australia, including specialised bridging finance solutions tailored to your professional circumstances.