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How Safe is a Bridging Loan?

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Q. How safe is a bridging loan? I have found a property that I would to purchase. I have two other properties that I have on the market now. With the way interest rates are at the moment are bridging loans taboo?

Josie’s Answer: Personally I would not feel comfortable with a bridging loan regardless of whether interest rates are going up and down.

I have heard some horror stories whereby real estate agents have given vendors the impression that their property will sell within a short period of time, only to find that there were no buyers around.

As a result, they are placed under immense financial pressure to pay off, in effect, two home loans. The only way they can relieve the financial burden is to have a fire sale, in other words they were left with no option but to drastically reduce the price of their property.

Of course, I am not familiar with your entire financial situation. If the new property you are purchasing is a great buy a quality investment and if you are financially comfortable, then you may be in a position to easily service both loans.

In the end, a bridging loan is an extra expense and needs to be factored in when analysing the return you hope to achieve from your investment. Just ensure you are separating emotion from logic. The way I see it, there are thousands of properties for sale, and so if you miss out, there will always be another one. Cheers and wishing you all the best for the future.

Don’t forget that the above information is general in nature and not specific to your goals and objectives.

It is recommended that you seek personal financial advice specific to your needs. Thanks for posting your question on www.askjosiekay.com. As you know, this is a free service and if you found it useful, I would be chuffed if you told your friends, family and workmates about www.askjosiekay.com – free financial advice by a Certified Financial Planner.

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