Have never used this type of loan before to purchase a property. Recently moved to Victoria and have found a property but property in Queensland yet to be sold. Interested in your thoughts re bridging loans, pros/cons etc. Thanks
BJ i think it all depends on how much you want the property in Vic.
Now a days the interest rates charged on standard bridging are the same as normal mortgage rates so the days of 4/5 % above base have gone.
You have to be releastic in what you think your property in Qld will eventually sell for and work our whether if you drop the price now you will be better off or holding out for the higher price and factor in the bridging interest and set up fees.
Have you consider using the equity and renting out your Qld property? Whilst you may not be maximising your Tax deductions and the interest on your new main residence will not be deductible (irrespective of the CGT implications) it might be worthwhile in the long term.
Will you ever come back to Qld or have you left for good?
If you want to air some numbers in the forum either I or any of the other Mortgage Brokers in here can calculate some interest rapayments and suggest some potential lenders.
Cheers Richard
richard at castlewhite.com.au
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I find bridging loans to have their place. They are good to help you get into that next property if you are ‘certain’ you don’t want the previous one any more (as Richard pointed out) AND you do not have the funds available.
The benefit with them is that you will only be required to service on the ‘end debt’ (what will be left when you sell your existing home and pay it into your new loan) with some of the lenders so you can hold more funds in the interim period.
The biggest problem, especially in a downward market, is not achieving your expected sale price and being stuck with the two loans or an end loan higher than what you expected. If you do your numbers and can sustain these levels in the event of not selling your existing home, I do not see a problem using them.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Thanks guys.
I have rented the property in BNE out for $330.00/week. Ballpark realistic valuation on this property would be around $450-500K.
Remaining loan balance is $94K. Property that we are interested in in MEL is around the $500K mark (although I still need to do some investigation if this is a realistic price for the area – just don’t know the property market in MEL very well yet).
Would like to keep the BNE property but also want to avoid huge $ to service a $400-500K mortgage on the MEL property if we did retain it.
We are confident however, that if and when we return to Brisbane, it is unlikely we will return to this property given a choice.
Appreciate any suggestions !In your situation, I would not use a bridging loan unless serviceability was the issue. If you can service the additional debt, it gives you a lot of time to sell your QLD residence. An example (assuming a 500k purchase price in VIC) is below…
Loan 1: $94,000
Loan 2: $125,000 interest only variable loan
Loan 3: $400,000 interest only variable loan with offset accountLoan 1 (secured against your current home) is your existing debt which will be deductible when you move out until you sell the house and pay the loan back.
Loan 2 (secured against your current home) is used for 20% deposit and stamp duty and other costs on the new purchase. This avoids mortgage insurance and will be deductible until you move into your new home.
Loan 3 (secured against your new home) is 80% of the home value and avoids mortgage insurance. It will be deductible until you move into the home.
Once you sell the QLD home, you pay out Loan 1 and Loan 2 and you can place any additional funds into the offset account attached to loan 3. This will reduce the cost of the loan but still leave the cash available for other investments or expenditure when ‘NEEDED’.
To not mix up your deductible and non-deductible debt, I would split Loan 3 into two. One would be the balance after being paid down and the other would be a limit equal to what you paid down on Loan 3 which will keep your borrowing at 80%. Keep everything interest only.
I hope you understand my explanation and I am happy to explain it in more depth if you need me to.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Thanks for the info MA. Would definately like to discuss this with someone in more detail off line. Can you recommend anyone?
I would like to understand all of the options available to me.You can email any of the brokers here who would be very helpful or you could email me on the details below. I do not process loans however I do give referrals if you need someone to help you more than the informaiton I provide in the emails.
Have a great day.
Please note, I will be away for the night so my response will not arrive until tomorrow night.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
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