5 Common Myths About Bridging Loans Debunked

December 7, 2022

5 Common Myths About Bridging Loans Debunked

The perceptions of bridging loans can be pretty different to reality. As a lesser-known type of home loan, it can be tough to get an accurate definition of what a bridging loan is and how it works. 

We’re here to bust some common misconceptions and set the record straight on bridging loans, what they are and how they can help your purchasing ambitions - helping you feel equipped to make informed decisions about your next move. 

Bridging loans are a great flexible and cost-effective way to help you finance your next property purchase while you wait to sell your current home. There are a range of reasons you may not want to sell your property at the time of purchasing a new home, whether that’s property market conditions or other personal circumstances. 

That’s where Bridgit comes in - we ‘bridge’ the gap between the purchase of a new property and the sale of your current home. Whether you’re upsizing, rightsizing  or downsizing, bridging loans are a great flexible, cost-effect way to move on your own terms. 

Let’s dive into five of the most common myths about bridging loans and what you need to know. 

Myth 1: Bridging loans are used as a last resort

Historically, bridging loans were viewed as loans for homeowners who have left financing too late or were unsuccessful at applying for traditional home loan products. 

In reality, bridging loans can be a first choice to support short-term strategies for homeowners. Bridging loans offer increased flexibility to help plenty of homeowners, whether you’re upsizing, downsizing or anything in between.

With greater control and flexibility, you don’t have to worry about getting the timing perfect when selling your current home and purchasing your new property. Bridging loans are a convenient and low-risk way of tapping into the equity you’ve built up in your current home to fund your next purchase. 

Bridging loans are a great choice if you’ve found your next dream home but haven’t sold your existing, are looking to skip the hassle of paying rent and moving around in the meantime, or you need to make an investment in renovations before selling your property. 

Myth 2: Bridging loans are complicated and stressful

Bridging loans are often perceived as complicated, stressful, and a bit of a pain to get approval for. Part of what makes people think bridging loans are complicated and stressful is its unfamiliarity, particularly if you’ve never heard of this loan type before. 

But, the market has certainly evolved, and lenders (like us at Bridgit) are making bridging loans more common. We’re passionate about offering greater transparency on what bridging loans are actually used for and how they can assist in your particular situation. 

Bridgit aims to take the stress out of bridging loans with our purpose-built tech and online application process (that can help you score approval within 24 hours). We’re an inclusive lender, meaning we consider all different types of borrowers and have flexible lending criteria. 

Our ultimate aim is to take the stress and hassle out of securing bridging finance with a digital loan solution that’s fast, convenient and built for today. 

Myth 3: Bridging loans are expensive

Another common misconception about bridging loans is that they are expensive solutions to accommodate ‘last resort’ property circumstances. 

However, Bridgit’s rates are becoming increasingly competitive, offering cost advantages with a 3-month interest-free period.

The other advantage is that there are no repayments until maturity and no double mortgages. We take over the first mortgage so you can progress and move on your terms.

Myth 4: Bridging loans are slow to be approved

In many cases, bridging loans are viewed as a slow-to-be-approved product with lengthy and painful wait times. However, Bridgit’s process looks a little different, designed to make your life easier. 

Unlike big banks (who usually review applications manually), Bridgit provides a simple online application process that takes just a few minutes to complete. Our digital-first solution means we offer 24-hour approvals with quick settlements, saving you time on long and tedious paperwork. 

How? Well, we’ve built all our own tech from scratch and harnessed tools like credit modelling and machine learning to automate the review process. Plus, being a paperless business means we won’t slow you down with printing, faxing or filing. 

Myth 5: Bridging loans result in double mortgages

Homeowners tend to assume mortgages are managed concurrently, and they will end up having to make payments on both mortgages. 

When you receive a bridging loan, the lender generally takes over the mortgage on your current home, financing the purchasing of your new home. This can sometimes include other costs associated with purchasing, such as stamp duty and lender fees. 

At Bridgit, we pay your existing mortgage, meaning you don’t have to worry about paying two mortgages at once. Plus, we offer no monthly repayments. 

Now that we’ve busted some common myths, you’ll have more knowledge on how to make informed decisions about your next home purchase. While there are plenty of misconceptions flying around, the truth is that bridging loans are a powerful way for homeowners to save on temporary living costs and jump on the best opportunities. 

Ready to find out more about Bridgit’s bridging loan? Discover how a Bridgit loan can help you make your next move.

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