This family had been in their Stirling home for 12 years. The property was worth approximately $1.1 million with a remaining mortgage of $380,000. They had been casually looking to upgrade for some time when a property came on the market at $1.35 million that ticked every box - location, size, school catchment, and character.
The problem was timing. If they sold first, they risked losing the new property to another buyer. If they bought first without selling, they would temporarily hold two mortgages with a peak debt of $1.73 million. They needed a way to bridge the gap.
Bridging loans require a lender who is comfortable with a temporary period of high debt and who understands that the peak balance will drop significantly once the existing property sells. Not all lenders offer bridging finance, and among those that do, the terms and conditions vary widely.
The couple also needed certainty about worst-case scenarios. What if their existing home took longer than expected to sell? What would the peak repayments look like? Could they service both loans simultaneously if needed?
A closed bridging loan has a defined end date - typically 6 to 12 months. During the bridging period you only pay interest on the peak debt. Once the existing home sells, the bridge closes and you revert to a standard end-state loan on the new property only.
Jason structured a 6-month closed bridging loan with Westpac. The structure allowed the couple to purchase the new property at $1.35 million while keeping their existing home on the market. Peak debt during the bridging period was $1.73 million ($380,000 existing + $1,350,000 new purchase).
Jason modelled the worst case - six full months of interest on the peak balance - so the couple knew exactly what the bridging period would cost. He also pre-approved the end-state loan so there was no uncertainty about what their ongoing mortgage would look like once the existing home sold.
The couple secured the new property and listed their existing Stirling home immediately. It sold within four weeks for $1.15 million - $50,000 above their conservative estimate. The sale proceeds paid out the existing mortgage ($380,000) and reduced the new loan, leaving an end-state debt of $580,000 on the new $1.35 million home.
The bridging period lasted just five weeks in total. The cost of the bridge - approximately $4,200 in additional interest - was a fraction of the risk of losing the dream property by trying to sell first.
We were terrified of holding two mortgages at once. Jason walked us through every number, showed us the worst case, and made us feel completely comfortable. The bridge lasted five weeks and cost us less than one month of rent would have if we had sold first and moved out.
Book a chat with Jason or Steve. We will assess your situation honestly and tell you exactly what is possible.