Understanding Closed Bridging Loans: A Comprehensive Guide for Australian Homebuyers

What is a Closed Bridging Loan?

A closed bridging loan is a type of short-term finance that helps you purchase a new property while you are still in the process of selling your existing one. The "closed" aspect refers to having a confirmed sale date for your current property, which provides lenders with a clear exit strategy. This assurance often translates to more favourable loan conditions, such as lower interest rates compared to open bridging loans.

How Does a Closed Bridging Loan Work?

Typically, a closed bridging loan covers the gap between the purchase of a new home and the proceeds from the sale of your existing home. Lenders usually consider the equity in your current property and any deposit paid on the new property. The loan is structured to be repaid in full once your existing property is sold, usually within a set timeframe of six to twelve months.

Key Benefits of Closed Bridging Loans

• Certainty and Peace of Mind: With a confirmed sale date, you can plan your finances more effectively.
• Potentially Lower Costs: Closed bridging loans often come with lower interest rates and fees than open bridging loans due to reduced lender risk.
• Flexibility in Timing: You can purchase your dream home without having to rush the sale of your current property, potentially achieving a better selling price.

Practical Tips for Using a Closed Bridging Loan

1. Confirm Your Sale Date: Ensure you have a legally binding contract for the sale of your existing property before applying for a closed bridging loan. 2. Budget for Dual Costs: Be prepared for the possibility of managing two mortgages until your property sale is finalised. 3. Consult with a Mortgage Broker: A broker can help identify the lenders offering the most competitive terms for your situation.

Common Mistakes to Avoid

• Underestimating Timeframes: Be realistic about how long it might take to sell your property and ensure the bridging period is adequate.
• Ignoring Fees and Charges: Understand all associated costs, including interest rates and repayment terms, to avoid unexpected financial strain.
• Not Having a Backup Plan: Be prepared for potential delays in the sale of your property and have contingency funds if needed.

How Esteb and Co Can Help

At Esteb and Co, we understand that every property transaction is unique. Our experienced mortgage brokers are here to guide you through the process of securing a closed bridging loan. We work with a wide range of Australian lenders to find the best solution tailored to your needs, ensuring a smooth transition between properties. Our personalised service means we’re with you every step of the way, offering expert advice and support.