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What is a bridging loan?

What is a Bridging Loan and How Can It Benefit You?

You've found the perfect home, but your current one is still on the market. Don't let this situation hinder your dreams. Enter the world of bridging loans – a financial tool designed to bridge the gap between selling your old home and purchasing the new one.

Bridge Loan

Principle of a Bridging Loan

Are you expanding your family, changing locations, or just seeking a fresh start? The bridging loan is your solution. Commit to your dream home without waiting for your current property to sell. It prevents the burden of double loan payments and ensures you don't lose a property you've fallen in love with.

Conditions for Obtaining a Bridging Loan

Targeted at existing homeowners, the bridging loan addresses the cash flow gap between selling and buying. It provides a substantial sum to acquire a new property before selling the current one. This short-term credit offers flexibility, allowing you time to sell without rushing and avoiding heavy debt.

How Does a Bridging Loan Work?

A bridging loan, typically for one year (renewable), grants you a maximum of two years to sell your old home. The loan amount, 60-80% of your property's estimated value, factors in outstanding capital and the possibility of not selling your old home. Banks determine this amount based on real estate market dynamics.

Calculating the Cost of a Bridging Loan

The cost depends on various factors. If you've secured an ideal buyer, better conditions and a larger sum are likely. However, if your property hasn't sold, the bank may approach with caution. Bridging loan interest rates, slightly higher than conventional home loans, range from 1.45% to 1.75% in 2020.

Types of Bridging Loans and Their Functions

  1. Dry Bridging Loan: Fully covered by the sale of the initial property. No additional loan needed. Repay only interest or insurance until the old home sells.
  2. Acquisition Bridge Loan: Paired with a conventional bank loan for the remaining sum. Involves repaying two monthly payments, impacting your budget.
  3. Repurchase Bridge Loan: Bought by a bank to streamline monthly payments at a more favorable rate. Useful when the maximum debt ratio is reached.


Bridging loans offer a lifeline to those caught in the transition between selling and buying a home. Understanding the types, conditions, and costs empowers you to make informed decisions. Now, take the leap and secure your dream home without the stress of financial constraints.


Can I get a bridging loan if I'm not a homeowner yet?

No, bridging loans are designed for existing homeowners.

What happens if I can't sell my old home within the loan period?

Banks may reassess conditions, possibly leading to adjustments in the selling price.

Are there penalties for repaying a bridging loan early?

No, prepayment is free of penalties in both total and partial deductible scenarios.

How do I determine the estimated value of my property?

Banks typically conduct their own assessment before approving the bridging loan amount.

Is it advisable to overestimate the value of my property when applying for a bridging loan?

No, it's not advisable. Banks may establish their own estimate, and overestimating could affect your loan approval.

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