Bridging Loans in Melbourne
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Bridging loans are becoming more and more needed throughout Melbourne as the real estate market changes and evolves.
Bridging loans are short-term loans that allow borrowers to pay off an existing loan and take out a new loan. The old loan will be paid in full once the new loan is secured and active.
A bridging loan can be used by individuals or businesses looking to purchase property, refinance or consolidate debt.
Bridging Loans are generally used by borrowers who have sold their current property, but have not yet found a suitable replacement property.
In this situation, they need finance to help them in the interim period while they look for an applicable replacement property.
Types of bridging loans
There are two types of bridging loans available to Australian borrowers. These include closed bridging loans and open bridging loans.
Both types of loans can be helpful depending on the circumstances, although each has its specific advantages and disadvantages that should be considered before applying for these products.
Open bridging loans
Open bridging loans allow borrowers to repay their debt over a while, ranging anywhere from 12 months to 24 months.
This type of loan is more commonly used when purchasing a new home while waiting to sell the old one.
Closed bridging loans are more restrictive in repayment periods, ranging from 3 months to 12 months.
This type of loan is more commonly used when purchasing commercial property and involves the borrower selling an existing asset to repay the debt in full.
Closed Bridging Loans
Closed bridging loans are a type of loan that must be repaid in full at a fixed point in the future.
They typically last less than 12 months, with the most common length being around six months. These are useful for those who need some additional cash flow to buy property but expect to have funds available in a few months.
With this type of loan, you will need to specify an exit plan when you apply, including selling your current home or receiving other funds from your investment portfolio or family members.
There are many types of bridge loans in Australia, and each type has its specifications and requirements. Before applying for one, you need to know the exact type that fits your situation. We can help you with all your bridging finance needs today.