Property owners look to bridging loans

More people choosing this option as awareness grows

Property owners look to bridging loans

Bridging loans are growing in popularity as property owners seek to snap up opportunities in the market before they have sold their current home.

Mortgage broker Mandy Hill (pictured above right), who runs Mortgage Managed on NSW’s Central Coast, said she had noticed an increase in the number of clients seeking bridging loans.

“Servicing’s still tight because interest rates have increased,” Hill said. “I’m building customers' knowledge around that and seeing where they're borrowing capacity now sits.

“I've had a lot of clients that are looking at their options to potentially retain their current home and have it as an investment property whilst they look to purchase an owner-occupied home to potentially upgrade to.”

However, Hill said while that was their initial goal, once she had helped them determine their borrowing capacity, most were unable to service both properties.

“They thought they could probably achieve that little bit more [borrowing capacity]… previously when the interest rates were lower, they probably could have.”

Hill said clients then often decided to sell their home and upgrade to a better property. “We're seeing a lot more people looking at bridging style loans.”

She discussed with clients the option of bridging loans or pursuing a simultaneous sale and purchase.

“It’s about educating them on what their options are and how they can still move forward with getting the upgrade that they're seeking, while navigating within their limits,” she said.

Because of the strength in the rental market, banks hadn’t tightened their lending criteria, Hill said, but had actually increased how much rental income they were willing to accept for servicing.

“Where some lenders have said we’ll take 80% rental income, some have come out and said ‘it’s highly unlikely these properties are going to be unoccupied so we’re going to take 90%’, which will give you a higher borrowing capacity.”

Bridging loan specialist sees uptick

Aaron Bassin (pictured above left), the CEO and co-founder of bridging finance specialist Bridgit, said lenders such as them had grown in popularity in recent years, challenging the traditional approach and offering homeowners and brokers a fresh approach to buying and selling property.

Bridgit, which was recently added to Mortgage Choice’s lending panel, had enabled homeowners to jump on property opportunities as they arose and sell their current property at their own pace, negotiating a sale price they were comfortable with.

“In this past quarter, we saw an increase of over 100% in bridging against residential properties in Australia, compared to the same period last year,” Bassin said.

“We can attribute this growth to not only market conditions, but also awareness of bridging finance, driven by new product innovation and policy flexibility to allow greater accessibility for bridging finance.”

Bassin said Bridgit was working to create more access to this solution and demand was predicted to grow exponentially in the next few years as homeowners looked to work with their brokers on new and alternative financing solutions for their next step. 

He said Bridgit customers enjoyed “no monthly repayments, no temporary living, no double mortgages, and 24 hour approvals”.

“We believe that bridging loans can help  homeowners achieve their goals, and we are committed to making residential bridging finance more accessible by working with our mortgage broker partners,” he said.

Are you noticing more of your clients enquiring about bridging loans? Share your comments below