Expat Bridging Loans
You’ve found your perfect next property and you know opportunities like this don’t come around that often. Unfortunately, so does everyone else and the chances are if your eyes on it, someone else is probably looking to purchase the property also. Securing the dream home is all about acting fast and this means you don’t always have the time to sell the home you’re currently living in, in fact you hardly ever will. This is where bridging finance can be extremely useful. Whether you’re upgrading or downgrading, bridging finance can offer solutions to juggling the pressure of multiple mortgages.
What is Bridging Finance for Expats?
A bridging loan bridges the gap between securing a mortgage for a new property before an existing property is sold. They offer short-term access to funds at a sometimes higher rate of interest or more likely, just at the standard variable rate, with no discounts applied. Your credit history will go a long way when it comes to securing a bridging loan with your lender but there are a number of other factors that will affect approval. These factors include the risk associated with the loan, the value of the property you currently own, the amount of the one you’ll be purchasing and the amount of time the loan needs.
Who Benefits from an Expat Bridging Loan?
Bridging Loans are well-suited to people looking to purchase a new property before selling their existing one. Due to the risks associated with this type of loan, you should only be considering bridging finance if you’re an asset-rich borrower who’s after hassle-free lending for a residential property. If you don’t have sufficient funding or security, then you may find yourself paying far more in the bridging period than you can actually afford.
How to Make Repayments On Your Expat Bridging Loan
A typical bridging loan extends for a period of somewhere between six and twelve months but can go for longer if needed. The most common term, however, is the difference between the settlement of the purchase and then the receipt of the sale property proceeds. We have seen these range from 7 days to 9 months depending on the client and the property(s).
After you’ve sold your existing property, these funds will be used to repay your expat bridging loan. Before this sale takes place, your minimum repayments will usually include only the interest. So while this makes it easier for you to balance paying off two mortgages, it also means that for the period of the bridging loan you won’t be making a dent into your principal debt and will therefore be paying even more interest in the long run.
The best way to avoid a massive debt at the end of this period, is to make any extra repayments where you possibly can. This means that the amount added to the loan of your new property will be reduced by what you’ve already paid during the bridging period.
In some circumstances, the loan interest can even be capitalised thereby meaning your cash flow costs are reduced during the period. However, buyer beware, these costs then add to your loan principal and you can end up with a higher “end debt” than you first thought or had accounted for.