I know there are a few brokers on here that may be able to help.
Our bridging loan is expiring soon. The house is on the market but is taking a little longer than expected to sell.
We would actually prefer to keep the property and put it up for rental.
Is it possible to refinance a bridging loan with a different lender and put it up for rent instead?
I couldn't find a straight answer online.
Yes we looked into this and know what the implications are. The question was about possibilities to refinance to turn it into investment.
if you want to repay the bridging loan with a principal and interest investment loan, i do not see how that is possible, as a bridging loan expects the balance to be paid through selling the property in the short term.
Its a short term loan vs a long term loan, with totally different expectations and criteria for the loan. It might be possible if it is totally paid off and nothing was owing before the bridging loan.
Yes if affordability permits
Yeah you probably want to engage a broker directly. This isn’t something someone can answer without looking into your finances in depth.
Bridging loans are approved with the assumption you’ll pay back a large portion quickly and often are the only option as a new loan on a second property wouldn’t have been feasible.
Did you look into whether you would have been able to get a second loan? Have you tried any online calculators to see what a bank will loan you / what you’ll be able to service?
We wouldn't have been able to get a second loan, however this wasnt taking into account potential rental income from the property.
I will get a broker to calculate.
I was interested to find out if the option was there in a first place. But it seems it may be possible.
As I said, plug it in to an online calculator and this time add in the expected rental income. This will give you a quick idea of if it’s not possible at all vs something your broker will entertain.
Also, check your contract on the bridging loan. There may be something in there that says that it can’t be refinanced etc.
For bridging loans you only need to have been able to service the loan for the new property, on the basis you sold the old property.
You can refinance out, as long as you can service the loan(s) for both new and old properties.
hi Op, Broker here. Without me knowing the details my guess that the chances of you being able to refinance investment are less. I am not sure what the discussion was at the time of doing your loan but I am assuming that you could not service(afford in bank calculator) all of the debt at same time, hence why the bridging loan option would have been suggested.
The option you are thinking of right now(to convert existing property to investment) is a preferred option suggested at the initial stage because it offers a safe way out. Even if you decide to sell and not rent it out. The flexibility is there if loan is variable.
But to tell you for sure, the broker/banker would need to know your full financial position. Including assets, liabilities, income and expenses.
The key difference between your thinking and banks calculation is adding a buffer of 3% on current interest rate you are paying. Assuming your current rate is 6.00%. Would you be able to afford the whole debt if rates went to 9%? That's how the bank is calculating.
My suggestion to you would be talk to your bank and make arrangements, if the property is taking longer to sell.
Hi, just out of curiosity. Typically, a bridging loan is for 12 months maximum. If someone requests an extension, say for another 6 months or so, what does your experience with mortgages tell you about the possibility of that extension?
It'd be very foolish with the intention to go bridging for 12 months then request an extension. With bridging loan you'll be required to have deposit large enough to cover interest for the bridged loan. For example if you're currently owing $300k and want to borrow another $500k, bridging loan rate is 7% (will always be higher than current rate for owner occupied), the bank want to see you have upfront savings of at least $56000 to cover the interest.
so it comes down to whether you want to gamble selling the current house more than the current market is willing to pay or losing $56k in a year time plus unknown loss at that time when they force you to sell.
in short bridging loan is a very expensive option and only works when property price is rising and/or you have found the dream home.
The honest truth is depends on circumstances. But getting extension will be very difficult.
The situation normally is similar to not being able to afford a normal mortgage. The bridging loan will expire and borrower will end up making arrangements with the collections team. They work with customer to minimize impact.
I have seen situations where sale settlement is few days after Bridging loan expiry so customers work with collections team and clear the debt when property settles.
If you could have refinanced whilst saying you would lease out one of the 2 properties for rental then you wouldn’t have needed bridging in the first place.
A bridging loan is a short term loan with lots of terms and conditions, and possible restrictions. Its not a normal principal and interest loan.
If you don't pay it back in time there might be implications for huge balloon repayments. I would find out asap, this is the kind of stuff you should look into before getting the loan not after.