New Ways Of Borrowing Trundle Bridging Loans Into The Shade
The Age
Saturday November 15, 2003
Despite the recent interest rate hike, with fears of more to come, the mortgage merry-go-round has lost none of its gloss.
Australian Bureau of Statistics figures released this week showed that housing finance was up by 4 per cent to more than $11.6 billion in September. However, auction results on November 8 and 9 indicated that the market had softened.
Against this shifting backdrop, home owners still keen to trade up must confront one eternal question: do I buy a new house first and sell my existing digs next, or should I do it the other way around?
Selling before you buy gives budgeting certainty, but because of the way settlement dates are structured, you could be forced to rush a decision involving hundreds of thousands of dollars. Buying first and selling second creates a different dilemma, in that most people need the equity tied up in their home to complete the purchase of their new residence.
Bridging finance has been the traditional solution to this problem, but a National Australia Bank spokesman says it has become ``quite uncommon".
``We find people are simply taking out a larger mortgage and then paying (part of) it off once they sell their existing house," he says.
However, according to Infochoice, banks still offer bridging finance, which might involve anything from interest-only repayments during the term of the bridge, to interest capitalisation options, where repayments start only when the house is sold.
For example, St George offers a Relocation Loan, which allows customers to choose any existing mortgage type - including discount variable and introductory fixed loans - for the end loan.
Infochoice research shows that the ANZ allows a term of up to six months only, compared to 12 months for its competitors. Westpac pegs its bridging loan interest rate to the current standard variable rate (now 6.82 per cent) for up to three months after which a 1 per cent premium applies.
© 2003 The Age
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