Have you found your dream home but haven’t sold your current one yet? Or maybe you’re ready to move but want to avoid the stress of perfectly timing your sale and purchase. A relocation loan, also called a bridging loan, can be the solution you need. This short-term financing option “bridges” the financial gap by providing the funds to secure your new house without waiting for your current property to sell. This way, you can focus on moving forward without the pressure of rushing through your sale.
In this article, Ausfirst Lending Group tells you about relocation loans and their benefits, so you can be better prepared to navigate your transition smoothly.
How Do Relocation Loans Work?
Understanding how relocation loans work is key to making a hassle-free and well-informed transition between homes. Here’s what you need to know about these loans:
Loan Structure
When you take out a relocation home loan, your lender will advance the funds needed to cover the purchase price of your new property and any associated costs like legal fees, stamp duty, and more. Your existing property serves as security, with both the new and current properties often held as collateral.
Repayment Process
Most relocation loans are structured with a capitalised interest option during the relocation period, which means you don’t need to make repayments on the new loan until your existing home is sold. Once your current property sells, the loan is partially or fully repaid using the sale proceeds.
Relocation Period
The standard relocation period varies by lender, typically offering up to six months if you’re buying an existing property and up to 12 months if you’re building a new home.
End Loan Amount
After your existing home sells, the remaining loan amount, known as the “end loan,” is calculated. This is the amount you’ll continue repaying over the loan term, often converted into a regular mortgage with principal and interest repayments.
What Are the Benefits of a Relocation Loan?
Below are the variety of benefits you can enjoy with relocation or bridging loans:
Gaining Financial Flexibility
Relocation loans give you immediate access to funds that cover essential costs like deposits, moving expenses, and even necessary renovations, helping ease the financial load and keep your cash flow steady during the transition. Moreover, by providing the means to secure your new property before selling your existing one, this loan lets you act fast in a competitive market without worrying about timing the sale of your current home. You can also use these funds to prepare your current property for sale, increasing its appeal and potentially its market value.
Deferring Loan Repayments
One of the key advantages of a relocation home loan is that it typically allows you to defer repayments on the loan portion for your new property. During the relocation period, the interest on this portion is often capitalised, meaning you don’t have to make monthly payments until your current property is sold. This can be a great relief, as you won’t need to worry about double repayments while managing the expenses of your move.
Extending Timeframes for Selling
Relocation loans usually allow 6-12 months to sell your existing home. This extended timeframe means you can wait for favourable market conditions, improving your chances of securing a better sale price. This buffer period can also provide peace of mind, knowing you don’t have to make hasty decisions under time pressure. With more time to prepare, you can work strategically, ensuring your current house is presented at its best to attract serious buyers and help you maximise the return on your property.
Simplifying the Move with Portable Loans
If you’re happy with your current loan terms and don’t want the hassle of starting a new home loan application, you can consider portability, which some lenders offer with relocation loans. Loan portability allows transferring your current home loan to your new property, so you can avoid the process of reapplying for a new mortgage. This option saves you time, paperwork, and potential re-application fees. Loan portability is especially helpful for maintaining continuity in your finances, simplifying the transition from one property to another, and reducing the steps required to finalise your mortgage on your new home.
Conclusion
Whether you’re looking to buy before you sell, renovate your existing property, or simply take the hassle out of your move, a relocation loan provides a flexible and financially sound solution. With various advantages, including options for deferred repayments, extended selling timeframes, and even portability, relocation loans can be tailored to suit your unique needs. You can make the most of these benefits by consulting a mortgage broker, who can give you valuable guidance on various aspects of these loans and the best rate packages available.
At Ausfirst Lending, our team is here to help you through each step, ensuring your transition is smooth and aligned with your financial goals. Contact us today to learn more about how a relocation loan can make your next move a success.
