Can bridging finance help you with your home loan
Can Bridging Finance Help you with your Home loan?
So you’ve used your bond repayment calculator to establish what you can afford in terms of a purchase price and the necessary repayments. But for some reason you fall short of what you can afford for one of the following reasons. Consider these scenarios and see whether bridging finance is for you.
Transfer Fees – Bond
If a purchaser has been granted a loan by a bank but is short of the transfer and legal fees it is possible in some circumstances, where the bond granted is higher than the debt due, to get an advance on the bond granted, for these costs.
Estate Agents Commission
If the attorney handling a property sale / purchase transaction is prepared to give a Letter of Undertaking to settle the loan to the estate agent for commission advance and the Principle of the agency is prepared to allow the bridging of estate agents commission to take place, then it is possible to arrange a bridging loan on the sale of land or buildings.
Generally the purchaser should have presented guarantees to the attorney and all documents ought to have been signed by all parties regarding the transaction
People older than 65 who own property and wish to access some of the available equity can access up to 40 % of the equity with no need to pay any monthly payments.
Common conditions: The client should reside in the residential property; both partners must be over 65 years of age and agree that the settlement of the loan can be made from the property owner’s estate.
Sellers Proceeds – Bridging
You have sold a property and made a profit and need some of the money now rather than when registration takes place.
Common conditions: As long as the attorney handling the transfer is prepared to sign a Letter of Undertaking that the purchasers have put up guarantees, that all Common conditions have been met and that he will disperse funds to the bridging company on transfer, then it is possible to arrange an advance of this profit; sale proceeds advance.
Similar to Debt Consolidation above, but all the debts you have are settled by the lenders on your behalf and your credit bureau listings removed. Property is the main source of the funds in lieu of the debt settlement. If clients do not own a property then the chances are you won’t be able to get assistance.
A second bond or further bond is one method where the equity of your property can be unlocked and converted to an access facility or to cash.
Common conditions: Client must be able to prove ability to service the loan granted and the value of the property must be higher than the current bond. You can calculate this with a bond calculator.
Debt Consolidation for property owners
This is a 4 month bond – if you have equity in a property a short term loan can often be arranged to settle your debts (from the equity in your property) and then arrange for you to apply for a normal 20 year or 30year bond (don’t forget you can use your bond calculator for this.). This is a debt restructuring program
20 year bond – if you have at least 40 % equity in your property but you are blacklisted at the credit bureau, a 20 year bond could possibly be arranged for you
Bridging for developers
Bridging for developers can be obtained where a property developer has almost completed, or has completed, a property development project and needs to get access to some of the funds due to him from the sale of units built.
There are various ways this can be done and so it is best to speak to a consultant to advise you.
For a rudimentary list of property bridging finance service providers a simple entry into a search engine will do. Shop around the net to see who’s out there and meet with your banks to compare notes.
For those looking for bridging finance in addition to your home loan, remember to use your bond affordability calculator to work out your preliminary repayments and then factor in bond registration costs et cetera. From there you will be able to tell where you stand with regards to your bridging finance requirements. Any challenges you may have encountered with bridging finance in the past consider approaching the FAIS Ombudsman.
Written by Matthew Campaigne-Scott