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Mortgage Investment Property Loans

Can I Get A Second Mortgage For Down Payment?

Having already entered the property market you are well aware just how addictive it can get. Whether you are living in the place you own or renting it out as an investment property, it’s no secret that property is one of the best investments you can make. Of course, they are expensive investments and require a large down payment to secure. This may leave you wondering: can I get a second mortgage for a down payment?

What is a Down Payment?

Let’s take a look at exactly what a down payment is when purchasing a property. It is essentially a payment that is made in cash when you purchase the place, often representing a percentage of the entire price. As a home buyer, it is common to pay anywhere between 5% and 25% of the total value as a down payment, while the bank or financial institution you have chosen for your loan pays the remainder.

Once you have made this transaction, you then continue to pay off the mortgage with your lender. As you can see, it is a sizeable chunk of money that you pay upfront, before you then go on to pay off the loan. This is why considering a second mortgage for a down payment is an attractive offer. Having already forked out one down payment before, it can be even harder to do so a second time, especially while also paying off your current loan.

second mortgage for down payment

How Does a Mortgage Work?

Buying a house is a big commitment, and if you have already been down this path, then you will understand the financial strain that can come from buying a second. The bigger the down payment you can make at the beginning, means the less you have to pay off in the long run, as you won’t be charged interest from your lender on that amount.

A mortgage is a type of loan. The property you purchase is used as collateral against this loan, so if you default on payments the bank can take possession of your home to pay back the loan. The principal is the amount you borrow from the lender to buy the property in the first place. The interest is the cost added on top for borrowing the money. You can choose from a fixed interest, where the rate stays the same, or a variable interest, which can change over the life of your loan.

Having a mortgage is a huge commitment, so let’s take a look at whether you can take out a second mortgage for a down payment.

second mortgage

Can I get a Second Mortgage for Down Payment?

You can, in fact, use the equity on your first property to buy a second one. What exactly does this mean?

Let’s take a look at an example. You bought your first home for $300,000 and took out a loan of $250,000. Five years later, your home is now worth $500,000 and you owe $250,000. This means you have $250,000 equity in your first loan and can withdraw up to $150,000 in home loan equity. You can generally release from 80% to 90% of the value of your property in equity. You then refinance to access this money, which can be used for your deposit and for pay off some of the property.

Another option is to cash out this amount to use it directly as a deposit for your second property. Some lenders may have restrictions on how much you can cash out, so be sure to check first. This can range from $50,000 to the full amount, depending on your lender.

So how do you qualify? Of course, not everyone will be entitled to take out a second mortgage, so do your research before going ahead. Here are some of the conditions you must meet:

  • You must owe less than 80% of the property value to your home.
  • Your repayment history must be exemplary.
  • Be able to provide at least two recent payslips.
  • Have a good credit history.
down payment

Is a Second Mortgage for a Down Payment the Right Choice?

Just because you qualify, doesn’t make it the right choice for you. There are plenty of other things to take into consideration:

  • Can you afford two mortgages?
  • Have you factored in the other costs that come with buying a house, such as building inspection, etc?
  • Have you shopped around for the best interest rate?

Where to go for Support & Advice?

If you are certain you are ready to take out a second mortgage for a down payment, then it always helps to get some professional advice before committing. The experts at Australian Lending Centre can talk you through all your options. Make the best decision for your circumstances and avoid facing issues down the track with our help.

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Refinance and Refinancing Home Loans

5 Things To Consider When Refinancing Your Home

With the current changes in interest rates and market conditions, the home loan given to you yesterday may not be the most suitable fit for you today. That is the primary reason why you have to consider refinancing your home. Refinancing your home allows you to get a better interest term and rate compared to the previous.

What is a home refinance?

Ever got yourself in a circumstance where you need to replace your current home with a new mortgage? Well, home refinancing is precisely that – getting a new mortgage loan to replace the existing home loan.

Refinancing your home is advantageous because it can reduce your monthly home payment amount, you can access finances for your mortgage improvement as well as cancelling home insurance premiums.

Before having a look at the five things to consider when refinancing your home, let’s check out the pros and cons of home refinancing.

Pros of Home Refinancing

The following are the benefits you will encounter when you refinance your mortgage:

Reduce Monthly Repayment

You might reduce your mortgage monthly repayment amount and end up with more money in your wallet if you manage to negotiate a better rate with your current lender. You will achieve this if you also succeed in setting a lower interest rate compared to the previous one with your new lender.

Debt Consolidation

You can use your mortgage equity to consolidate your debts. It is good because you will find yourself reducing interest rates on your debts. You can roll all your debts and loans into your newly refinanced mortgage loan. With this in place, you will only worry about paying one monthly payment often at a low-interest rate.

Greater flexibility

There are many more benefits you will receive when refinancing like receiving greater flexibility in terms of changing the duration of your loan and switching to the fixed or variable interest rate.

Drawbacks of home refinance

It is rare to find a product without its side effects. As much as refinancing can save you money, it can also land you in hot water. While lower interest rates and reduced monthly payments might lure you at first glance, it vital to also know the potential risks that might come along. Home refinancing can cause you the following problems;

Extend a Loan’s Term

Even when interest rates drop drastically, it is not always the right choice to refinance your home. Refinancing your home will typically increase the amount of time you will take to repay your mortgage loan.

Take, for example, getting a new five-year loan to replace an existing five-year loan; loan payments will be calculated to last for the next five years. If your current mortgage loan has one year left, refinancing may result in higher interest costs.

Closing Costs

It costs money to end a contract of a professional football player in the famous English Premier League. The same applies to refinance a home. You will pay a particular fee to your new lender as compensation. Extra costs may be incurred to obtain legal documents, appraisals, credit checks, among others. You might be forced to repay your mortgage insurance even if you paid for the previous home.

Consider the following

Well, for you to avoid any risks when refinancing your home, you need to consider the following:

Know Your Home Equity

Your property’s equity is the first thing you should evaluate before you make a home refinance. It is the first qualification you will need to refinance your home. Your home refinancing application will have high chances of being approved if your property equity is high. You might owe more in your home than it is currently worth or you might have no equity in it. It will all depend on your financial condition or hosing market.

Know Your Credit Score

Checking your credit score is important. If your credit file is filled with defaults, court judgements or credit enquiries, it will make it a lot harder to secure a loan with a traditional bank. Traditional lenders have become stricter on lending criteria. Alternative Lending Centres, can be more flexible; but you will still need to be aware of your score.

Your Debt to Income Ratio

Some people assume that they can get a refinance if they qualified for a home loan. It is not always the case because lenders have not confided themselves to credit scores only. They have raised the bars and become stricter with Debt to Income Ratio.

While it might seem challenging to get home to refinance, your most recent debt-to-income ratio might calm down your prospects. Always strive to keep your arrears to the minimum

The Cost Of Refinancing

Every good deed comes with a cost. The same applies to mortgage refinancing. You should always find out and get to know any expenses that are attached to your new loan. It will cost you 3% -5% of the overall refinance amount to refinance a home.

There are fees which can be reduced or at times paid by the lender. These fees might affect your principal or interest rate.

Know Your Taxes

Some of you rely on mortgage interest deduction to lower your state revenue tax bill. A home refinance may reduce your tax deduction if you refinance and start paying less interest.

It is advisable to visit a tax advisor who is experienced with home loans to provide you with valid information before you decide to apply for a home refinance.

Bottom Line

Refinancing your home is not as easy as it might seem. You need to take time to think and plan about it. You don’t want to fall on a hot frying pan afterwards. Before you go for a refinance, it will be wise if you reach out to the Australian Lending Centre for remarkable advice. They will help you figure out whether you should or should not refinance.

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Home Loans

What Happens When You Default On Home Equity Loans?

If you default on home equity loans, the consequences can be severe.

Maintain your financial health and homeownership with the help of this blog. We discuss the consequences and reveal 6 tips to avoid defaulting on your loan.

2 main consequences of Defaulting on Home Equity Loans

1. Collection Agency Involvement: When borrowers default on their home loans, lenders often sell the debt to a debt collection agency.

These agencies will attempt to recover the outstanding balance through persistent calls, demand letters, and possibly sending collectors to your home. This process can be stressful and damaging to your credit score.

2. Foreclosure: In more severe cases, the lender may initiate foreclosure proceedings to recover the money lent. Foreclosure means the lender can sell your home to recoup their losses. The primary mortgage lender takes priority over the home lender during a foreclosure sale.

If the primary lender holds the certificate of title, they are entitled to the proceeds first. However, depending on the completion status and holder of the certificate of title, refinancing complications can affect which lender gets paid first.

Bad credit

6 Tips to Avoid Defaulting on Your Home Equity Loan

1. Communicate with Your Lender:

Avoiding your lender’s calls or ignoring their letters will not improve your situation. However, being transparent about your financial difficulties can encourage them to assist you.

If you’re struggling with payments, contact your lender immediately. Explain your financial situation and express your willingness to find a solution. They understand that working with you increases the likelihood of recovering their money

They may offer to modify the loan terms, adjust interest rates, or restructure your repayment plan. This can help to make the loan more affordable so you can avoid defaulting on your home equity loan.

2. Explore Foreclosure Alternatives:

If you’re struggling with payments, you could explore alternative options to provide temporary relief and prevent foreclosure.

It is worth noting that you should only do this if you lack funds due to a short-term cash flow issue. If you can’t afford repayments full stop because your circumstances have changed or you have racked up an uncontrollable amount of debt, then taking out another loan will only add to this financial burden.

Alternative forms of finance that might be suitable to prevent foreclosure include:

3. Consider Debt Consolidation:

If multiple debts overwhelm you, consolidating them into one low-rate loan with manageable monthly payments can help you regain control of your finances.

4. Refinance Your Mortgage:

Refinancing can lower your monthly payments and interest rate, making staying current on your loan easier. However, carefully consider the terms, as extending the loan term can increase the total cost over time.

5. Consult a Financial Advisor:

A financial advisor can provide valuable guidance on managing your finances and exploring potential solutions. They can help you create a feasible financial plan to navigate through tough times.

6. Resell and Downsize:

While drastic, selling your home and downsizing can be a practical solution. Use the proceeds to pay your mortgage and secure a smaller, more affordable living arrangement. This option can alleviate financial pressure and prevent foreclosure.

Don’t Default On Your Home Equity Loan

Contact Australian Lending Centre today to learn more about your options and find a suitable financial solution available to you.

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Mortgage Financial Fitness Financial Planning Home Loans

Will My Car Loan Affect My Mortgage Application?

A car loan can help you a lot if you plan to get your next car faster. However, a car loan can affect your mortgage application or other types of significant loans. If you are planning to buy an expensive car, this means that you will require a large loan. That car loan can impair your future borrowing power. But this doesn’t mean that you need to choose just one of these two.

Let’s see how a car loan can influence mortgage applications and how we can deal with such a situation.

First Things First

When you apply for a home loan, you will need to provide information regarding your financial status. This means that you will have to give documents regarding your monthly income, assets you own and other ongoing payments. This is how a lender will determine whether you can pay back the loan or not. Every lender wants to avoid doing business with people who might not be able to keep their word because of their financial problems. They want profit, not excuses.

If it were a personal loan, your mortgage application would be fine. But since we are talking about an expensive car loan, your mortgage application might get rejected due to your other massive loan. Either that or come with a lot of restrictions.

mortgage-application

Will My Car Loan Affect My Mortgage Application?

A car loan will have a high impact on your finances. Given all the taxes you need to pay, a car loan can take most of your monthly income. Still, aiming for a cheaper car might be of some help. Since cars tend to lose their value quite quickly, getting a very expensive one may not be a good idea, especially if you intend to apply for a mortgage.

Mortgage applications will act the same so that you will be left with little to no money. This is why a lender will probably have to refuse your mortgage application.

A lender wants to know that you will pay your mortgage and you won’t default on it. He will analyse your assets and other methods of income. If he sees that you have the financial power to afford a car loan and a mortgage at the same time, he might give you the green light. If not, it might be better for you if you only had one.

Defaulting on a mortgage is not a good sign for your lender and your finances. Car loans and home loans can quickly turn into uncontrollable debts, and you might end up losing everything. So don’t think of the lender as the bad guy, but be objective and calculate what you can and can’t afford, because in the end, if you are dishonest, you will suffer the most. Because banks and lenders make sure they never lose.

eligible-for-loan

Can I Still Be Eligible for a Mortgage Application?

Yes, you can. Your car loan will affect how much you can borrow, but if you don’t want an expensive house, that a limited amount of money can be just enough. If you can’t get the sum you need, you can search for an affordable home. When it comes to loans and money, flexibility is a must.

If you want to increase your chances of getting your mortgage application approved, then it’s time to clean a little bit of your credit file. Pay your debts and try to repair your bad credit. Also, consider debt consolidation as a possibility. Lenders will check your credit to find out who they are dealing with and also what other assets you own, just in case they might have to make up for that loan with something else rather than your money.

Having a savings account is a great idea. It makes you more trustworthy and responsible in the eyes of your lender. Let’s not forget that having some savings might help you quite a lot to reduce the amount you would apply for.

Also, try to talk to your lender. The more information he gets regarding your situation and income, the bigger the chance of getting your request approved. Don’t forget to tell him your exact plans.

suitable-car-loan

Final Thoughts

So, the short answer is that a car loan can influence mortgage applications and under certain circumstances, it can get your requests denied. But do not let yourself discouraged. Evaluate your possibilities, cut down on the unnecessary expenses and, if you can, try to pay ongoing debts before applying for a mortgage.

You can talk about these details with Australian Lending Centre. Our friendly consultants will tell you about your chances of receiving a loan and, if you fit our criteria, you may even get a good mortgage option. Advice never harmed anyone so you should not miss the chance of clarifying your options face to face with an expert.

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Mortgage

The Reality of Mortgage Repayments

In spite of the loan solution you carefully select, you should comprehend the way in which a loan works, and what it implies. Understanding the reality of mortgage repayments is the first step to making the right decision to fit your financial status.

Understanding Interest

Recently, Australians have benefited from low and attractive interest rates. So, how does this influence your mortgage repayments? Mortgage providers grow or diminish their rates, to mirror the movement exercised by the set cash interest rate. At the moment, interest rates are estimated at around 4.5 per cent, depending on the lender.

Although selecting fixed mortgage repayments over variable ones might seem the right choice, as it protects you from fluctuations, some other aspects should be considered. If you’re locked into a variable home loan, when the cash rate lowers, your interest will also decrease. Even though this is an unmatched advantage, Aussies should know that low rates don’t plan on staying this way forever.

To grasp the way in which this phenomenon influences your mortgage repayments, hear us out. A standard variable rate for a 25-year old loan of $200,000 would have a $1112 monthly payment, with 4.5 per cent interest rate. If this would change with as little as one per cent, it will either rise to $1228 or diminish to $1001.

Also, bear in mind that, over the life span of a loan, fluctuations may reach $100 per month. What we’re trying to say is that you should embrace a repayment plan with the right contingency measures, in the case in which the interest rate spikes.

When the Loan Matures

You should also note that the market conditions are due to change. That is inevitable. In this respect, you should take advantage of whichever opportunity you have to refresh your financial approach. An option might be to discuss with your financial advisor. But, before doing that, there are some solutions for adjusting your mortgage repayments:

  • Refinancing: When the interest rates are low, you can always consider refinancing. That may be a more convenient option. Even though there are exit and entry costs that should be factored in, as a general rule, you’ll recoup those expenses over the life of the loan.
  • Pay ahead: If the interest rates are low and your budget enables you, you should consider getting ahead on your mortgage repayments. If you manage to make a considerable repayment during this time, not only that you will decrease your overall loan balance, but you’ll save a lot on interest rate payments.
  • Fix your loan: If your credit conditions are permissive enough, we advise you to lock in the new low rate.

To conclude, comprehending the market conditions does pay off. When you sign a loan agreement, you should know what it implies, how the market is due to change and how it can affect you.

In spite of your current status, don’t hesitate to refresh your mindset, in the case in which the market alters in your favour. Why shouldn’t you take advantage of it? Nonetheless, bear in mind that you should discuss with your financial advisor before taking the leap.

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Mortgage

When Is It Best to Apply for a Mortgage Without Your Spouse?

Applying for a mortgage is a tough decision to make, especially when you have a spouse and/or kids. There are cases when in fact it’s best to apply for a mortgage without your spouse. We’ll tell you all there is to know about mortgages and what helps you get your application approved, or what could get it dismissed.

Although starting a marriage and looking for a home might be a dream come true for most of us, applying for a mortgage is a rational decision to make. This takes time and ultimately, it might be smarter to apply separately for it.

Let’s see when it’s the best time to apply for a mortgage without your spouse:

If One of You Has a Bad Credit Score

Applying for a mortgage with your spouse means that both of your credit scores will be put on display for the lender to check and compare. Unfortunately, even if one of you has an excellent score, the one with the bad credit can bring both of you down.

The bank will pay more attention to the negative score even if the other score could balance the negative one. As a general rule, it would be best for both spouses to have a medium rating, rather than big discrepancies.

In Case of Identity Theft

There’s nothing worse than applying for a mortgage and finding out that someone has used your name, destroyed your credit score, made many debts and, in addition, had a high credit usage.

To avoid this, check your credit score regularly. As rare as it is, identity theft is hard to prove and it also takes time to sort out the situation.

If your spouse has fallen victim to this sort of crime, but you’ve already found the perfect home, applying for a mortgage on your own is a wise decision.

In Case of Excessive Debt

A high credit card usage is considered to be over 20% of the current loan you’ve taken. Applying for a mortgage when your spouse’s debt has a high-income ratio might come with a denied mortgage application.

If the loan is still approved, consider that you’ll have to deal with higher interest rates, so it might be best to choose to apply on your own.

If There Is No Credit Score

Let’s say that maybe a person has saved money, and never had to take on a loan. From the bank’s point of view, that individual presents a risky application. By not knowing anything about his/her finances and not having any proof that the applicant is trustworthy, the bank will be sceptical in approving the loan.

Your spouse’s non-existent credit history or a short one will certainly be detrimental when applying for a mortgage.

Start by checking both of your credit scores and then talk to a mortgage specialist to give you some advice. He/she will surely tell you if it’s best to apply together, or on your own.

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Refinance and Refinancing

Why Should You Consider Refinancing Your Home Loan?

People take a home loan refinancing into consideration when they’re no longer satisfied with their actual home loan or when they want to make some house renovations.

Refinancing becomes a choice when your lending needs have changed or when your home loan is starting to pose difficulties.

  1. Home Loan Refinancing has lower interests rates

This is the main reason why Australians take into consideration refinancing their mortgage. The easiest way to figure out if it’s worth the trouble to switch your home loan is to calculate if the costs of the refinancing will be paid off in the next two years.

Interest rates and fees can build up, so don’t just look at the lower interest rate that comes with refinancing. Take into consideration all the fees implied in the process.

  1. It’s more compatible with your renovation project

Home loan refinancing brings benefits to homeowners who desire to invest in structural renovations that aren’t compatible with personal loans.

Refinancing allows you to use the equity in your property as collateral. This is an option only if the value of the house outpasses the cost of renovations.

Some home loans don’t offer the option for a construction loan, so you may just have to go into refinancing in order to find one that fits your needs.

  1. Consolidating debts is a good option

Home loan interests rates are lower, and this is why many people add their personal loan or car loan to their mortgage. Dividing the payments over the course of the next 25 to 30 years will ensure much smaller monthly payments, but raise the interest rates.

You could benefit from this option of refinancing if discipline and regular payments are something that you’re used to. You could add a personal loan to your house loan, but instead of paying it off for 25-30 years, choose to pay it over the course of the next five years. This will allow you to sort your personal debt faster and even save almost 75% of the interest rate that you would have spent by prolonging the payments to suit your house loan.

  1. Refinancing offers flexibility

If you’ve come to the point where a fixed rate isn’t your best alternative, and you want and actually can pay out the loan faster, then home loan refinancing is an alternative. Being able to pay according to your income will get you out of debt faster, and it also comes with the split facility, a redraw facility, and an offset account.

  1. When mortgage payments are too big

Sometimes, our finances can’t support the mortgage payments and we’re forced to look for an alternative that requires a smaller amount per month. Even though the interest rates could go higher, there are times when our budget isn’t able to cover the payments, so refinancing is in order.

Home loan refinancing comes with advantages and disadvantages, so before taking the step, see if it will suit your needs!

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First Home Buyer News

Should you access superannuation for buying a house?

It is every young family’s dream to buy a house to make into a home but with rising property prices, it is becoming more difficult for first home buyers to enter the market. A young family might not have much in the way of savings and it can seem impossible to come up with the minimum amount needed for a deposit on a mortgage. The Australian government, under Treasurer Joe Hockey’s suggestion, is considering letting people access their superannuation account for the purpose of putting that money towards buying a house.

Superannuation for a new home

The retirement funds are generally not allowed to be accessed until a person is the age of 60 but the federal government is taking a lead from other countries such as Switzerland, Canada and Singapore and thinking of letting people dip into their retirement funds early to invest into a home. The idea has gotten a lot of backlash from the opposition government and it probably should. Although the money is for that person to spend however they want, it also serves as a safety net to make sure that people can afford their needs when they get older. Instead of having the capital being held by the government at a secure interest rate and knowing it will be there in the future, it might soon be possible to take a risk and use some of that money in the real estate market.

The proposal hopes to have several positive and negative effects. Getting young families into homes is a major goal of the current administration. But the goal also includes letting people become more self-reliant and less dependent on the superannuation scheme. The 5% taken out of Australians’ pay cheques is usually something that all Australians are looking forward to one day. However there is a possibility that many will not have as much as they might have had when it comes time to enjoy their golden years if this proposal gets approved.

The access to retirement funds might just fuel home prices higher and have a muted effect on making homes more affordable. Any large decision like buying a home is already big enough and maybe it is not the best decision to risk your superannuation funds on the volatile property market. There are many ways to get the loans needed for a mortgage and with the current low interest rates it could be wiser to leave your superannuation alone and buy a house the old fashioned way.

The old fashioned way being; acquiring a home loan or a debt consolidation loan from a trusted bank or a trusted lender, usually at a more competitive rate. Speak to a financial consultant about the right type of loan for you and your family to buy a new home.

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News

IMF Declares Australian Banks Won’t Collapse Under Subprime

Fears of Australia’s economy going into recession as a result of the US housing price collapse may be unfounded.

According to the International Monetary Fund (IMF), banks are not in danger of going belly-up, with Australian house prices only “moderately” overvalued.

As the IMF says “The results do not produce evidence of a significant over evaluation of house prices”.

Australians can sigh a breathe of relief over the news that puts our economy in relative safety, given the current global credit crisis.

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First Home Buyer

First Mortgages No Longer for the Young

More Australians are buying houses later in their lives.

As a new mortgage survey suggests, a new social trend is emerging in the mortgage market. The survey found, “37% people looking to purchase their first home in the next five years will be over the age of 40”, jumping 28% from last year.

This new trend signifies a shift in the way people are using and spending their money. With the current climate of inflation and rising living costs, people can no longer afford to fund mortgage repayments earlier in life. As Mortgage Choice Survey Spokesperson Kirsty Sheppard explains, people are focussing on other life goals such as career and travel, before entering the property market.

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Bridging Finance

Banks Decline Homeowners from Bridging Finance

You may have found your dream home but have not yet managed to sell your existing property.  Without the proceeds from the sale of your current property, many people can find it difficult to buy the new property.  Bridging finance enables people in this situation to purchase a new property, whilst you await the sale of your existing and offers financial relief during this period. Unfortunately, banks sometimes decline bridging finance leaving you in a difficult situation.

According to industry experts, bank lenders are increasingly blocking homeowners from receiving bridging finance.  This strict position by the major banks is restricting the property market by delaying home purchases and forcing homeowners to sell their homes before they’re able to buy a new one.

Bridging Finance

Some mortgage experts believe that the banks are claiming that bridging finance can produce bad debt – so basically it’s just not worth it for the banks to offer.  Effectively bridging finance becomes like a second mortgage on the first property and banks don’t like increasing the amount of money they lend, because in many cases they don’t have enough collateral to secure that extra money against.

Once upon a time when banks weren’t getting a good margin, they would have to lend as much as they could, now that they’re getting a much better margin, they’re less inclined to approve riskier loans. For this reason, banks are known to decline bridging finance.

Mortgage experts also believe the banks’ dislike to bridging finance may be due to the fact homes in certain areas are taking a lot longer to sell these days, which elevates the risk lenders assume when providing a bridging finance loan.

At the Australian Lending Centre we have access to a panel of non-bank lenders who offer bridging finance during the sale and purchase of property.  To speak with a loan consultant regarding bridging finance today, simply call 1300 138 188 or fill in an enquiry form to your right and a loan consultant will call you shortly.