It’s been some time since I last blogged and I must apologise for that. I have had so many things to write about but so little time to do it.
You see, my fourth child was born four weeks ago and along with another baby under one as well as two older boys aged 9 and 11, life has been rather hectic of late.
However, that is not the topic of this post. What I really wanted to talk about today is to share with you a personal experience with moving house and how I used a Bridging Loan to assist in that process.
We were happy in our three bedroom house and when number three came along we turned an unused courtyard on the side of the house into a fourth bedroom. This was clearly the best option for us as we loved the location we were living in and the cost of the addition was well and truly made up for by the increase in value of the home. The addition was finished just in time for the arrival home of number three.
A few months later my wife discovered she was pregnant again and the due date would mean we would have two children under one year old. A new dilemma in as much that there were no real viable options to put a fifth bedroom on to the house and even if we could, with six people now sharing the house we just didn’t have large enough living areas anyway.
So the decision was made to move house and we soon realised we didn’t have much time to find a house and get moved in and settled before my wife got too far along in the pregnancy to be able to cope with a move.
Cue the Bridging Loan.
A quick discussion with my friendly Mortgage Broker (ie myself) to make sure a bridging loan was achievable and also to calculate how much I could afford to spend on a new home, repayments, etc and off we went hunting for a new home to accommodate our ever increasing household. At the same time we started discussing the sale of our existing home with real estate agents and generally getting the home ready for sale.
As it turned out we found a new home fairly quickly. There was a reasonable amount of interest in the place but because we were able to make a cash offer with no ‘subject to sale’ clauses and a quick settlement our offer was accepted. Personally I reckon we got the house well under market value.
Next it was on to selling our existing home. An agent was chosen, marketing plan agreed to and within a couple weeks we had our first open, followed by another two in the days after that. There was a reasonable amount of interest in our home and an offer was soon on the table but the purchasers wanted a longer settlement. However, to get the longer settlement they were prepared to pay significantly more than what I was asking for the home. A quick number crunch on the calculator showed that their offer with the longer settlement was well and truly worthwhile despite the fact that there would be interest costs I would have to cover for the longer period until settlement.
So we moved into our new home and got settled in with plenty of time before the new baby arrived and a couple months later the settlement on our old home went through. The proceeds from the sale of our old home went on to the Bridging Loan and after a quick discussion with the Lender to calculate the new repayments, we are now left with a normal home loan.
As you can see the advantages of using a Bridging Loan, for us, were enormous. These advantages are summarised as follows:
- It allowed us to buy a new home quickly and because we didn’t have to have any conditions such as ‘subject to sale’ or subject to finance’ and we could be very flexible with a date for settlement, we were able to negotiate with the vendor from a much stronger position compared to others who were interested in the property.
- We didn’t have to put our existing home on the market until we had found a new home.
- Once we had bought the new home we didn’t have to rush selling our existing home to try and meet a simultaneous settlement, which meant we could negotiate with purchasers from a much stronger position. In other words, we weren’t desperate vendors.
- We achieved a much higher sale price on our old home and bought the new home for a much lower price, which left us well in front despite having to pay interest on a much higher loan during the period of bridging finance.
- It completely eliminated any stress associated with the whole process.
Whilst a Bridging Loan may not suit everyone, it is still something that should at the very least be considered if you are thinking about selling your existing home and buying a new one.
Mark Lewis is the Executive Chairman of Bernie Lewis
This article is for general information only. Since everyone's personal financial situation is different this article can't be taken as financial advice. If you would like to discuss this article further or how it could relate to your personal financial circumstances please give us a call on (08) 8300-8300 so we can discuss it with you in more detail.
