How does a bridging loan work?

Some lenders may allow you to capitalise the interest on a bridging loan, relieving you of the necessity of making loan repayments during the bridging period.

If you choose to capitalise the interest you will most likely have a slightly higher new home loan to cover the capitalised interest.

With some lenders you can have up to six months to sell your home if you are purchasing an established home and up to 12 months if you are building.

When you sell your first property, the proceeds of the sale are applied to the bridging loan, and any remainder becomes the end debt or new home loan. At this stage your home loan will usually revert to the lender’s standard variable interest rate or the interest rate you have negotiated.

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