In our lifetime, many of us will move from one property to another, be it for a growing family or an upgrade. When buying and selling properties simultaneously, bridging loans can be a lifesaver. In this comprehensive guide, we’ll delve into what bridging loans are, the types available, important considerations, and how they can be beneficial for your property journey. If you’re ready to take the next step, SU Credit’s mortgage experts are here to help you find the perfect bridging loan tailored to your financial needs.
What Is a Bridging Loan?
A bridging loan is a short-term financing option that “bridges” the gap between the downpayment required for your new property and the proceeds from selling your existing property. It helps you avoid delays when making the downpayment while waiting for the funds from your property sale. Bridging loans are typically offered by banks and licensed financial institutions, ensuring you receive reliable and regulated financial support during your transition.
Capitalised Interest Bridging Loan Vs. Simultaneous Repayment Bridging Loan:
There are two types of bridging loans – capitalised interest and simultaneous repayment. The capitalised interest bridging loan allows you to defer interest payments during the loan tenure, while the interest is added to the loan principal. On the other hand, the simultaneous repayment bridging loan requires you to make regular interest payments along with the repayment of the principal amount. However, in Singapore, both types require repayment within six months, making the difference between them irrelevant. The key decision is whether to bridge only the downpayment or include a portion of the home loan as well.
Key Facts about Bridging Loans in Singapore:
– Maximum amount: The loan amount is limited by the net proceeds and CPF balance from your property sale. However, as long as the sales proceeds from your previous property can cover it, you can get that limit approved – and even use it to get a lower Loan-to-Value (LTV) ratio as well.
– Maximum tenure: Bridging loans must be settled within 6 months, ensuring a short-term financial commitment.
– Interest rates: Interest rates vary among banks, typically ranging from 5% to 6% per annum. However, you can work with SU Credit’s mortgage experts to find the most competitive rates and terms.
How to Use a Bridging Loan to Lower Your LTV Ratio:
Bridging loans can help you optimize your Loan-to-Value (LTV) ratio, which determines the amount of your home loan relative to the property’s value. By using the proceeds from your property sale to cover the downpayment, you can reduce your home loan amount, leading to a lower LTV ratio. This can result in better loan terms and interest rates, making homeownership more affordable and manageable.
Is Taking a Bridging Loan a Good Idea? 4 Important Considerations:
When deciding on a bridging loan, ask yourself these key questions:
- Why am I taking a bridging loan? Consider specific scenarios like en bloc sales, newly renovated properties, or property upgrades. SU Credit’s experts can help you assess your unique situation and recommend the most suitable financial solution.
- How much cash do I have on hand? Evaluate if taking a bridging loan is necessary to preserve cash or if other options like CPF funds are available. Our team will guide you through the available choices, ensuring you make a well-informed decision.
- What are the total costs incurred? Calculate the interest and additional fees you will pay for the bridging loan to understand the financial commitment. SU Credit’s transparent approach ensures you have a clear picture of the costs involved.
- What is my Plan B if the sale of my old property doesn’t go through? Understand the exit clauses and penalties in case your property sale faces setbacks. Our mortgage experts can guide you on contingency plans to safeguard your financial interests.
Consult Our Mortgage Experts:
At SU Credit, we understand that every individual’s financial journey is unique. Our knowledgeable mortgage experts are ready to provide personalized advice and support to help you make the best decision for your property transition. Whether you need guidance on bridging loans or other home loan options, we are committed to finding the perfect solution tailored to your needs. Contact us today to take the next step towards a seamless and successful property journey.
Bridging loans offer an efficient solution for managing the financial transition when buying and selling properties in Singapore. By understanding the types, benefits, and considerations associated with bridging loans, you can make a well-informed decision to ensure a successful and stress-free property journey. For personalized advice and to explore the best bridging loan options, reach out to SU Credit’s mortgage experts. Let us be your trusted partner on your path to homeownership.