If you’re in the midst of selling your property and buying a new one, you’ll most likely apply for a bridging loan to help you bridge the monetary gap. By signing up for a bridging loan, you’ll be able to raise capital and clear necessary payments for the new and/or existing property. In Singapore, it’s usually taken up by people planning to sell their old flat for an upgrade or a downgrade. While waiting for the sale proceeds, such loan can be used for the downpayment and other expenses related to the property transaction.
Get up to $500 worth of Takashimaya vouchers when you apply for your home loan through MoneySmart!
At MoneySmart, we make the application process simple for you. All you have to do is provide us with your details, and we’ll take care of the rest. This means we’ll be checking all bridging loan packages available in the market, and give a recommendation that works best for you.
Given that a bridging loan is a type of loan designed to be paid within a short period of time, it’s important to assess your capacity to pay off the loan on time.
Singapore Citizens, Permanent Residents and foreigners who are in the process of selling their property in Singapore can apply for a bridging loan. To get an approval, it’s important to have a good credit score.
To kick start your application, you should be able to provide the Option to Purchase (OTP) document, which states that you have the exclusive right to purchase the said property. Your CPF withdrawal statements and outstanding bank loan statements will also be needed to be able to determine the proceeds that will be available.
Late Payment Fee Depending on your bank, late payment fees usually range from 3-5%. Even though banks have a grace period of 15 days, you shouldn’t be too complacent because it will affect your credit score.
Banks will be using your property as security for your loan repayment. So if you don’t want to risk losing your hard-earned investment, you need to make sure that you have the capacity to repay the loan on time.
As a golden rule, before you even think about applying for a bridging loan, you need to make sure that you’re not overestimating the amount you can sell the property for. You’ll be facing a serious headache if the property value is miscalculated.
The first type of bridging loan is Capitalised Interest. It covers the entire amount of the new home you’re planning to purchase. With this, repayments will only commence after you sell your old home. As such, you don’t need to pay for two loans at the same time. On the contrary, Simultaneous Repayment bridging loan works the other way around. You need to simultaneously repay your home loan along with the bridging loan, which can be quite burdensome.