Hi Everyone.
My wife and I are currently getting ready to move from our current home. We want to buy another property before we sell our current property. That way we can move straight in, no renting in between. The bank we have our current loan with has suggested a bridging loan( obviously they would do this).
I haven’t seen too much written on this subject, so I thought I would ask. The thing is, we have amassed a large amount of equity in our current home and would easily be able to finance a deposit on the future property.
I am not entirely sure how these bridging loans work, and I sure as hell do not want to be paying two mortgages at the same time with neither of them earning their keep for a period.
I guess I am asking what would be the better option, 1. bridging loan or 2. Buying the property as an investment with the equity we currently have. Problem is that in Queensland an investment property has a substantially more expensive stamp duty than a PPOR. This is one reason we are considering a bridging loan.
The end result will be the same either way. You will be paying interest on all loans until the old main residence sells.
You can buy the new property as the main residence and get the reduced stamp duty. A bridging loan won’t change this.
Go for the one with the lower interest rate.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
In most cases you won’t have to actually make the monthly loan repayments but can have the interest payments capitalised into the loan and paid out when the current PPOR sells.
As Terry mentioned stamp duty can still be paid as though it was a PPOR.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Terry and Richard.
Good advice regarding capitalising the repayments.
Capitalisation of payments is the primary benefit – the one thing to keep in mind though is you still want your property to sell ASAP. I’ve seen some nasty cases where the property has failed to sell for an extended period of time, the interest keeps piling up and it all starts becoming an expensive proposition.
For a well located normal metro property this generally isn’t too much of an issue – just be sure that properties are selling easily within the market you sell in.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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