Types of short term property loans: explained

December 7, 2022

Think 30-year mortgages are the only type of property loan you can access? Think again.

There are a range of scenarios when a short-term property loan might make sense for you. Maybe you’ve purchased your dream home but haven’t sold your current property. Perhaps you want to add value to your home through renovations prior to selling, and need to tap into your home’s equity to make it happen. 

Whatever the case might be, there is a range of different short-term property loans to consider. To help you make an informed decision about which loan is right for you, let’s dive into everything you need to know about the types of short-term property loans available. 

What are short-term property loans?

Before we go any further, let’s take a step back and explore what short-term property loans are. 

In a nutshell, short-term property loans are ways to access property finance (without committing to a 30-year mortgage). Typically, these loans are a way for homeowners to bridge the gap when selling their current home and buying their next property. 

As the name suggests, these loans are usually a short-term solution (most last for 3 to 12 months). Plus, most of these short-term property loans are interest-only loans. Here at Bridgit, we give homeowners 3 months interest-free when taking out a short-term bridging loan. 

The other big difference between short-term property loans and standard mortgages is that you’ll usually have to work with a non-bank lender (like Bridgit). That’s because these loans are specialised products that require the support of a specialised lender who knows this exact loan type back to front.

 

Why would borrowers choose to take out a short-term loan?

There are plenty of benefits to taking out a short-term loan, especially when you’re looking to secure the keys to your next property.

Some of the benefits of short-term property loans include:

  • Capitalise on the best opportunities: with short-term property finance, you can quickly unlock the funds you need to make a compelling offer and secure your dream property.

  • Save on temporary living costs: Of Australians who sell first and then buy again, over 50% of them are having to find temporary living and spending on average $8300 on things like temporary living, moving and storage costs. This is a lot to take on and a lot of expense.

Ultimately, short-term loans enable you to move on your own terms and skip the costs and hassle of moving multiple times. 

Now we’ve covered the basics of short-term property loans, let’s run you through the four key types of loans that fall into this category.

Short-term property loan 1: Caveat loans

If you’re in need of funds fast, a caveat loan might be the solution for you. Caveat loans offer fast settlements and short-term loan terms that run for anywhere from one to 12 months. 

These loans operate as a second mortgage which allows you to borrow against your current property and draw on the equity in this home. 

So, why is it called a caveat loan? Well, it uses a document known as a caveat to secure your loan against the title of ownership of your current property. This means that this property can’t be sold while the caveat is in place. 

Often, a caveat loan is taken out to cover unexpected business expenses or if a homeowner needs bridging finance to secure their next property. 

Short-term property loan 2: Equity release loans

If you’re looking to unlock the value in your current property before making your next move, an equity release loan might be right for you.

These short-term property loans allow you to tap into the equity in your current home.

Whether you need fast access to cash to fund your deposit or want to make value-adding renovations to your existing home, an equity release loan is a handy short-term solution to gain the funds you need.

Short-term property loan 3: Bridging loans 

Here at Bridgit, we’re experts in a type of short-term property loan known as bridging loans. We help Aussie homeowners buy their next property before they’ve sold their current home with a loan that bridges the gap. 

We harness the power of tech to offer homeowners an easy 5-minute online application process as well as same-day approval (and settlements within 48 hours). 

Our bridging loans work by unlocking the equity in your current home to fund your next purchase. We help you jump on the best opportunities and allow you to buy on your own terms, without having to fork out the costs of double mortgages and expensive short-term living costs. 

We even give homeowners 3 months interest-free and no repayments until loan maturity to take the hassle out of making your next move. 

Ready to buy now and sell later? Learn more about the benefits of accessing a Bridgit bridging loan.

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