Page 19 - Smartline eBook - Upgrading your home
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You will need to show your lender the council-approved building plans and a fixed- price domestic building contract before your loan can be approved. Your builder will also need to provide proof of registration and a certificate of currency of insurance.
7. Bridging loan – for buying and selling
This is an additional short-term loan taken out on top of your existing home loan that allows you to purchase your next home before you have completed the sale of your current home. In most cases, you will need to have your current home on the market or a contract of sale before the lender will approve your bridging loan.
To qualify, you’ll need to demonstrate that you have significant equity in your current home, as higher loan-to-value (LVR) requirements may apply. You will also need to have the capacity to service your increased borrowings. This is an interest-only loan where the interest is compounded monthly on your outstanding loan balance during the bridging period. Interest rates are typically higher than standard mortgage rates.
Bridging finance can be very expensive, especially if it takes you a long time to sell. If you don’t sell within the agreed time frame (around six–12 months) you may start to be charged a higher rate, have to make principal-and-interest payments or be forced to sell your property for less than you wanted. This could leave you with a shortfall in funds for your new home purchase.
Loan features
Your Smartline Adviser will discuss with you what type of loan and what loan features are appropriate for you given your financial situation. For example, should you take out a principal-and-interest loan or go interest-only for a fixed period? Would a variable rate, a fixed rate or a split-rate (half-variable, half-fixed) be more appropriate given your budget constraints and future plans?
There are also a range of loan features that differ from lender to lender and from one loan to another, including offset accounts, redraw facilities, line of credit options, credit cards, mobile banking facilities, insurance packages, access to discounts and so on. Some features come with higher rates or fees, so choose carefully and be sure to discuss the advantages and disadvantages of each with your Adviser.
At the end of the day, it’s about weighing up the financial and non-financial considerations for each option and finding the right solution for your unique circumstances.
With your Smartline Adviser, you can be sure to find the right loan for you with a competitive rate, setting you on the path to financial success and happiness in your new home.
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