Property auctions move fast. When you spot your dream home going under the hammer, you've got seconds to make a decision that could cost hundreds of thousands of dollars. For Australian Defence Force members, bridging loans offer a solution that lets you strike while the iron's hot.
What exactly is bridging finance?
Bridging finance does exactly what the name suggests - it bridges the gap between buying a new property and selling your existing one. Instead of waiting months to sell your current home, you can access bridging loan options from banks and lenders across Australia to purchase immediately.
Think of it as a short-term loan that covers the contract purchase price of the new home while you're still the owner of your current property. This creates what we call 'Peak Debt' - the period when you're carrying both mortgages simultaneously.
Why auctions and bridging loans work together
Auctions don't wait for your property settlement. When that hammer falls, you need:
• Immediate access to funds
• No subject-to-sale conditions
• Confidence in your borrowing capacity
• Quick settlement capability (usually 30 days)
A bridging loan provides all of these. You can bid with certainty, knowing your finance is already arranged.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Defence Loans today.
How bridging loans work for Defence members
The loan term usually runs 6 to 12 months to sell your existing property, or up to 12 months if your new property is being built. Here's how the numbers typically work:
Peak Debt Phase:
• Your existing home loan balance
• Plus the new property purchase amount
• Minus any deposit you're contributing
End Debt Phase:
• Just your new home loan after selling the original property
Many lenders offer interest capitalisation during the bridging period, meaning you don't make principal and interest repayments on the bridging portion. Instead, interest gets added to the loan balance.
Interest rates and costs to consider
Bridging loan rates typically sit above standard home loan rates. You might see:
• Variable interest rate options
• Fixed interest rate alternatives for certainty
• Interest rate discounts for Defence members through specialist lenders
• Potential lenders mortgage insurance (LMI) on the combined loan amount
Stamp duty on your new purchase is due regardless of your selling timeline, so factor this into your financial situation planning.
The application process for Defence members
Applying for a bridging loan involves:
- Property valuation of your current home
- Income verification through recent bank statements
- Loan to value ratio (LVR) assessment across both properties
- Exit strategy confirmation for selling your existing property
Defence members often benefit from a more streamlined application process due to employment stability and specialised lending criteria.
Getting loan pre-approval before auction day
Smart bidders get pre-approved before auction day. This means:
• Knowing your exact borrowing capacity
• Understanding your loan interest rate
• Having confidence in your bidding limit
• Reducing settlement risks
Your mortgage broker can help you understand different bridging loan options and calculate bridging loan repayments based on various interest rate scenarios.
Should you buy or sell first?
The local property market plays a huge role in this decision. In a seller's market, bridging finance often makes sense because:
• Quality properties sell quickly at auctions
• You're not competing with investors who have cash ready
• You can negotiate better terms when you're not desperate to sell
• Your family doesn't face temporary accommodation costs
Consider whether your new purchase will be a home loan or investment loan, as this affects your tax position and loan structuring options.
Making it work with your Defence career
Defence members face unique challenges like:
• Potential postings during the bridging period
• Irregular deployment schedules affecting settlement dates
• Specialist lending criteria that civilian brokers might not understand
Working with a finance broker who understands Defence careers means your loan application accounts for these factors. They can structure offset account arrangements and ensure your variable loan rates or fixed interest rate loan terms align with your service commitments.
Bridging finance isn't suitable for everyone, but for Defence members looking to secure auction properties quickly, it can be the difference between securing your ideal home and watching it slip away.
Call one of our team or book an appointment at a time that works for you to discuss your bridging finance options.
