Purchasing your dream house is very exciting. You finally will trade your old home for a dream home. A home you’ve dreamed of owning. And also would like to live in every day.
What a Bridging Loan Is
This is a short-term loan provided by moneylenders. This serves the purpose of bridging the financial gap. The gap is between the sale of the old home and the acquisition of a new home. A bridging loan may be used for other uses. This includes renovating your home as you await approval on the mortgage request.
Types Of Bridging Home Loans In Singapore
Singaporeans can access two bridging home loan types.
- Simultaneous Repayment Loan
For this financing type, you have to do simultaneous repayments. This is for both the home loan and your bridging loan. You are given a leeway time period of 12 months. This is to allow you to sell your property. For this, you are required to submit your financial documents. This will be proof showing your seriousness towards repaying on time.
- Capitalized Interest Loan
For this funding source, the moneylender funds the entire amount. Thus you can purchase your new home and the repayment of your bridging loan is activated. That’s once you finish the sell of your present-day property. During the tenure of your bridging loan, your loan will have accrued some interest on the principal amount. Thus you will need to pay back the principal + interest on your loan.
What You Should Know Before Taking A Bridging Home Loan
When you provide the document for the option to purchase. You may request for the bridging loan. Most financial institution that offer home /mortgage loans also offer the bridging loans. This helps ensure a seamless transition. That is from moving from your present home to the new home.
Ensure you do research on bank policy factors. This is in regard to bridging loans and home loans. You should know about restrictions imposed by some banks. This is concerning the payments you may make and the number of lump sum acceptable at a time.
How To Apply For a Bridging Loan
The current policy allows the use of a home loan. This should go to 80% of the home value. The remainder may be paid as down-payment. This you may either pay out of pocket or use CPF savings. However, different lenders will slightly different loan-to-value ratio. This terms will depend on the property type you are buying. That is if it’s HDB or a private property.
You could access 80% of the amount approved. And this is for the HDB properties. To get this, you have to get a letter from the HDB. Provide this letter as you transact for your property. This will ensure successful acquire to your home using 80% financing.
To apply for the bridging loan, you should get a copy of Option to Purchase document. That’s from the HDB flat buyer.
Additionally, you should have funds. This is for exercise, stamp duty and for Purchase Option. Buying a new home may not be as daunting as you think because there are loans that fit your financial needs.