Bridging loans - a case study

Not sure how a bridging loan works? Here's a practical example.

A couple owned their home unencumbered and wanted to buy and relocate prior to the sale of this property. They believed that their property would present better for sale without their outdated furniture and also, they did not want to suffer the daily hassle of keeping the house in tip-top order for prospective buyers. As vendors, the couple were also reluctant to allow a longer than normal settlement time frame.

Their current property is valued at $450,000 and their new home is $568,000. They are on limited incomes and so could not afford a loan of $500,000. They elected to buy the new property, move in and use a capitalised interest loan. This couple sold their existing home for $612,000 within 4 weeks, but it’s important to note that there was still the risk that the current home might not have sold within the specified six months.

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