The need to upgrade, downgrade or adjust to other changes that life brings you may have you selling your current property and needing to move to another one.
Many costs are involved in the process, from paying the downpayment and the moving costs. For those who are short on funds, a bridging loan can take care of these costs before you receive the earnings from your property sale.
But before making any further plans, you must know how to calculate bridging loan so that you know the amount to expect and what you can do with it. You will also know the amount that you should pay back at the end of the loan term after you do your calculations.
It’s best to seek a bridging loan from the lender you are getting your home loan from, if applicable. Also, note that you can use a bridging loan for all kinds of property, including a bridging loan for a HDB flat.
Why Do You Need A Bridging Loan?
You need a bridging loan or bridge loan to fill the monetary gap created by the pending sale of one property and the purchase of another. Its loan amount provides you with the capital you need to place a downpayment on the new property as you await the release of the proceeds of the sale of your old property.
By taking up a bridging loan, you would be able to get to move into your new place instead of having to put up at a hotel, which could be expensive. You may also use the bridging loan for other expenses related to the transaction for both the new and old properties.
As such, a bridging loan in Singapore is designed for those who are in between homes and could use some financial assistance to get to their new property quickly and seamlessly, as they wait for their old property to be sold.
Note that for this loan, you would only need to pay the interest of the bridging loan due for the period you held it. When your money from your old home comes in, you would only repay the loan amount and the interest accrued in the few months you held the loan.
How Can A Bridging Loan Help You?
As mentioned, a bridging loan helps you meet your current obligations such as closing the financial gap that exists between the time preceding the property sale proceeds and paying for a new property.
The money can also be used to cover your moving expenses, and ensure that both the new and old properties are in good living condition.
Lenders are not likely to ask questions about how you intend to use the money from the bridge loan. A licensed money lender will only ask that you have an asset to back your loan with and for proof that you can repay the loan.
A bridge loan is also an attractive option because it can be arranged quickly. It takes 24 to 48 hours, unlike a mortgage or property loan in Singapore that takes one to two months.
In addition, since the loan is asset-backed, you need not provide a great deal of information such as your money lender report or proof of your income.
Without extensive checks, you can access the money you need sooner, which would be of great help to you.
What To Consider Before Getting A Bridging Loan
Consider the following factors before looking for a bridging loan:
State Of The Real Estate Market
Assess the property market first to be sure that your old property will not lose value in the days to come as this would impede your ability to get the new property and pay the loan you get.
Cost Of The Loan
Consider the total cost of the bridging loan, taking into account the loan amount, processing fees, and any other charge that may come up during the processing of the loan.
Here’s how you evaluate what each money lender is offering – take into account the processing fees, interest rates, and other similar charges. Choose the lender that has the most friendly terms to you.
Before you sign any document, be very clear on the loan tenure. Ensure that the time given is enough for you to pay the loan.
This goes hand in hand with the loan tenure. Check to ensure that you can comfortably pay the monthly installments for the period indicated.
How To Apply For A Bridging Loan
The application process is straightforward. You only need to provide the requested documents, and the lender will handle the rest. It will check on your eligibility for a loan and the legitimacy of the documents you provided.
With regard to your eligibility, the lender must check to ensure that you can pay the loan. So when approaching a money lender, ensure that your MLCB loan information report is favourable, and shows your commitment toward paying your debts.
Other documents to present include the Option To Purchase (OTP), which indicates that you have the exclusive right to purchase the new property, your loan information report, and your CPF statement.
How To Calculate Bridging Loan
Many money lenders offer a bridging calculator online that should automatically give you the figures. But it’s important to know exactly how to calculate bridging loan.
Let’s say, for example, that you are financing a $900,000 property purchase and you are expecting the proceeds from the sale of your old property in six months. You may also be waiting for your mortgage loan or another property loan to mature. Here’s when a bridging loan will come in handy.
Here’s how the loan will be calculated:
5% cash payment: 5% × $900,000 = $45,000
20% cash or CPF downpayment: 20% × $900,000 = $180,000
Loan amount: 75% × $900,000 = $675,000 (maximum 75% LTV ratio)
If you already paid the initial 5% in cash, you could apply for a 20% bridging loan to cover the 20% to be paid using cash or your CPF.
Fees And Charges
The only fees applicable to this loan are the late payment fees, which are charged at a rate between 3-5%.
Typically, lenders offer a 15-day grace period during which you can repay the loan without attracting a fine. But don’t be complacent because the late payments will affect your loan repayment history.
Get A Bridging Loan From The Right Lender
For an easy and quick bridging loan, contact Lending Bee, a trusted licensed money lender in Singapore. Our team of loan professionals will work with you to tailor a solution that should make your property ownership dreams come true sooner.
You can visit Lending Bee at any of its four locations: Orchard, Bedok North, Yishun, or Jurong East.
Frequently Asked Questions
What Will I Use As Collateral?
With a bridging loan being property-backed, your property will be the loan security. So to avoid losing it, keep up with the monthly payments.
What’s The Interest Rate?
The bridging loan interest rates typically fall in the 5-6% range, depending on the money lender you approach.
How Long Is The Tenure?
The loan tenure of a bridging loan is short, usually about six months.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.