wise members, please help... bridging?

[aul]

Hi All.

This is my situation.

I have signed contract for a house and settlement is about 5 1/2 weeks from now (agent said it might be able to be extended, but agents say anything to get the signature).

I am planning on selling my IP, but obviously, will not be sold before my new house's current settlement period.

Current house (IP) - $300k loan. Value I would say mid $400, say $430k after costs.

Deposit for new house. - $300k (this is separate to the $300k current loan)
Cost + Stamp duty of new house - $550k

Would I be better off:
1. Just pay the $300k deposit, take a $250k loan for the new house
Then take the $130k cash proceed from sale of old house to bring down debt of new house.

2. Some sort of bridging finance.

I do not want to keep both due to serviceability and other reasons plus am not comfortable with $550k debt. Plus I have used redraw in a non-tax-effective way on my IP.

Thanks

 

[The Y-man]

Current house (IP) - $300k loan. Value I would say mid $400, say $430k after costs.

Not sure I get this bit....

The Y-man

 

[Mick C]

Hi All.

This is my situation.

I have signed contract for a house and settlement is about 5 1/2 weeks from now (agent said it might be able to be extended, but agents say anything to get the signature).

I am planning on selling my IP, but obviously, will not be sold before my new house's current settlement period.

Current house (IP) - $300k loan. Value I would say mid $400, say $430k after costs.

Deposit for new house. - $300k (this is separate to the $300k current loan)
Cost + Stamp duty of new house - $550k

Would I be better off:
1. Just pay the $300k deposit, take a $250k loan for the new house
Then take the $130k cash proceed from sale of old house to bring down debt of new house.

2. Some sort of bridging finance.

I do not want to keep both due to serviceability and other reasons plus am not comfortable with $550k debt. Plus I have used redraw in a non-tax-effective way on my IP.

Thanks

Yes a Bridging loan might help you in this situation: But there are risk...
Firstly..


-Yes Bridging loan will allow you to improve serviacibility
-yes the bank will take in consideration that one of the property will be sold
- yes the bank do offer " interes only...even NO interest " period for the new loan till settlemnt of the old place

But

1. there is a Timeframe- around 6-12 month
2. If you dont sell your home within the timeframe you are forced to repay or force to sell!!! bank takes over
3. They may ask for 1st mortgage on the home your selling...only 1-2 lenders does this.
4. if you sell your home within 1 month ...all good- but you would have spent $600 Establishment fee, plus another cost to join and LMi is payble...so high cost just to start up.

But all in all. good product; if you know you can sell within the timeframe- and you have no cash,and servicabilty of 2 loans might not be possible.


regards
Michael

 

[Mick C]

In terms of which one too choose, need to look at your whole situation and financials....

Best to speak to a broker


Regards
Michael

 

[Spectre]

I'd prefer to take option 1 if your servicing can support it without having to sell on a forced timeline.
A thing to bear in mind is what the bank valuers value at vs what the market is willing to pay - especially when a bridge is in play and if the agent lets it slip - are two different things

 

[Mick C]

Option 1 is the safest and better option.

if you dont "need" a bridging loan" ...don't do it.

Regards
Michael

 

[aul]

thank you all.
I think I may just do that.
It also doesn't restrict the time to sell as we will be able to service both loans for a little while at least.
I assume fees involved in either case would be the same.

researching bridging loans, I see they can be around the 9% interest p.a mark.

I will probably take option 1.

PS: Y-Man

"Not sure I get this bit....

The Y-man"

Sorry, my wording was not great

Current house (IP) - $300k loan. Value I would say mid $400, say $430k after costs.

IP:
Assumed selling for $450k
Assume $20k costs - agent fees + others. I know it will be less but good to play on the higher side
Leaves $430k after sale.
Need to pay the $300k left owing on the loan and close it, leaving me with $130k to put towards the new house.