Property bridging loans are ideal for clients that have sold their homes and have in the meanwhile found the dream home that they would like to purchase.

The problem is that the capital they need is tied up in the sale of their current home.

Depending on how quickly the sale is finalized these funds can sometimes take very long to reflect and until they do you won’t be able to use them. That’s when a bridging loan becomes very handy as you can use the loan to pay the deposit on your new home so you don’t miss out.

A bridging finance loan is a short-term fix that allows clients access to funds that they need when they need them in order to take advantage of a time-sensitive deal.

What is a bridging loan?

This type of loan allows clients access to the money that they will receive from the sale of their home before the registration and transfer process has been completed and the actual funds are available. This money can then be used to pay for the transfer costs or used to secure a deposit on a new property.

Clients may apply for up to 80% of the amount that you will receive when you sell your house.

A bridging finance loan is a short-term loan that is available for 3 to 4 weeks while you are waiting for the cash from the sale of your property to reflect. The loan is cleverly named because in a sense it creates a bridge that the client can use until their own money is made available to them. This helps free up cash flow. This process can take between 6 weeks and more to be completed. A bridging loan is perfect to bridge that gap during that time.

Who may apply?

You will need to meet certain requirements to apply for bridging finance. You can apply if you are a real estate agent or if you own an estate agency, and you are waiting for commission on a property that you have recently sold. You may apply if you are a property owner that has sold their property and you are waiting for the money to be paid into your account.

This loan can also be applied for by those clients wishing to apply for a further mortgage or a bond on their existing property.

How much funding can I apply for?

Estate agents may apply for a loan of up to 85% of your net commissions. Property owners that have sold their properties may apply for up to 80% of the net sale of their homes.

A bridging loan is a form of a secured loan. The lender will have to ensure that your claim is legitimate and that you are receiving the money in order for you to borrow against it.

How much will it cost?

The costs will vary between loans, but the repayments are usually calculated on interest only during the bridging loan period.

Benefits include:

  • Put down a deposit on your new property
  • Increase your day-to-day cash flow
  • You don’t need to wait for the money from the sale of your property
  • This money can be used to build a new property while you are still living in your current home

Risks include:

  • The sale of your home could fall through
  • Your home could take much longer than expected to sell
  • Your home could sell for much less than you expected

Things to ask yourself when applying for a bridging finance loan

Ask yourself the following questions before you apply:

  • How long will you need the money to last you before you get your payout? This will affect how much interest you will be charged
  • How long do the houses in your area normally take to sell?
  • Are you buying or building, your next property?
  • Do you have any other loans currently? Can you afford to make payments on both loans at the same time?

Can I apply for a bridging loan with bad credit?

Having bad credit won’t negatively affect your chances of having your bridging loan approved. A bridging loan is a secured loan so once the lender has checked with the broker that everything is in place. The lender will decide if your application will be approved depending on the merits of the case.

A bridging loan is a short-term secured loan solution. The funds are secured by the money that you will receive from the sale of your home as soon as the registration process has been completed.

Bridging loans available

There are different types of bridging loans available. You may apply for a bridging loan if you are waiting for money that you will receive soon.

You could be expecting money from the following:

  • A provident fund payout
  • Money from retiring
  • Money from a divorce
  • Money from being retrenched or dismissed

How long before I receive the money?

Your bridging loan can take between 72 hours and up to a couple of weeks to be approved. The time that it takes will depend on a number of different factors. The lender will need to confirm your details with the broker and ensure that you will be receiving the money soon.

Documents that are required to apply

  • Your valid South African ID
  • Proof of address in a form of a municipal account
  • Your last 3 months bank statements
  • A signed validation certificate
  • A signed offer to buy your property (this must be signed by the owner and the buyer and witnessed by the broker)

A bridging loan can be a lifesaver to free up cash that you need while you are waiting for the money from the sale of your home to be finalized.