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Bridging Home Loan

Bridging Loan for Home in Singapore

Q: Can I repay my bridging loan with my CPF?

No, you cannot directly use your CPF funds to repay a bridging loan in Singapore. Bridging loans are typically repaid using the proceeds from the sale of your existing home.

Q: Can you pay off the bridging loan early?

Yes, you can usually repay your bridging loan in Singapore early without incurring penalties. This can help you save on interest costs and clear your debt sooner. However, it's essential to check the terms and conditions of your loan agreement to confirm the early repayment options.

Q: How long does it take to get a bridging loan for your house in Singapore?

The processing time for a bridging loan in Singapore can vary depending on the lender and the complexity of your application. Generally, it can take anywhere from a few days to a few weeks to get approval. Factors that can influence the processing time include the completeness of your application, the valuation of your properties, and the lender's internal processes.

What is A Bridging Loan?

A bridging loan is a specialised type of short-term financing designed to assist homeowners in Singapore who are in the process of buying a new house while simultaneously selling their existing one. It is one of the best temporary financial solutions for homeowners, allowing you to access funds to complete the purchase of your new home before receiving the proceeds from the sale of your current property.

Crucially, a bridging loan must be taken in conjunction with a new home loan; it cannot be obtained as a standalone financing option. This ensures that the bridging loan serves its intended purpose of facilitating a smooth transition between properties.

Things to Know About Bridging Loans

Before taking out a bridging loan in Singapore, it's essential to understand the key aspects of this type of financing. Here are some important factors to consider:

Maximum Amount of a Bridging Loan

The maximum amount you can borrow through a bridging loan is typically limited to a percentage of your existing property's valuation or the purchase price of your new home in Singapore, whichever is lower. This ensures that the loan amount remains manageable and aligned with your financial capacity.

Maximum Tenure of a Bridging Loan

Bridging loans are inherently short-term in nature. The maximum loan tenure is usually capped at six months, reflecting the temporary nature of this financing solution. This time frame allows you sufficient time to sell your existing property and repay the bridging loan with the sale proceeds.

Interest Rate of Bridging Loans

Interest rates on bridging loans in Singapore are generally higher compared to traditional home loans. This is because bridging loans are considered higher risk due to their short-term nature and reliance on the successful sale of your existing property. It's crucial to factor in the interest costs when evaluating the affordability of a bridging loan.

Types of Bridging Loans Available

Capitalised Interest Bridging Loan

With a capitalised interest bridging loan, the accrued interest is added to the principal loan amount instead of being paid monthly.

This means you don't have to make any interest payments during the loan tenure. Instead, the interest is capitalised, and the final loan amount, including the accumulated interest, is repaid upon the sale of your existing property. This option can be beneficial for those who want to minimise their immediate financial outlay in Singapore.

Simultaneous Repayment Bridging Loan

A simultaneous repayment bridging loan requires you to make monthly repayments on both the bridging loan and your new home loan concurrently. This means you'll be servicing two loans simultaneously until your existing property in Singapore is sold. While this option involves higher monthly repayments, it can help you reduce the overall interest cost in the long run.

Using Bridging Loan to Lower LTV

A bridging loan can be a strategic tool to lower your Loan-to-Value (LTV) ratio when buying a new property, ultimately leading to potential cost savings. A lower LTV generally means lower risk for the lender and can result in more favourable interest rates on your home loan in Singapore.

For example, if you need a larger down payment for your new home but lack the immediate funds, a bridging loan can cover a portion of it, reducing your overall home loan amount and thus your LTV. This can lead to lower interest rates, saving you money over the loan tenure. While a bridging loan can be advantageous, it's important to carefully assess the associated costs and ensure you can comfortably manage the repayments on both the bridging loan and your new home loan.

Should I Get a Bridging Loan?

A bridging loan can be a useful tool for homeowners in Singapore who are looking to upgrade their property or purchase a new one before selling their existing home. However, it's best to carefully consider whether a bridging loan is the right option for your individual circumstances. Here are some key questions to ask yourself:

Why am I Considering a Bridging Loan in Singapore?

Clearly define your reasons for needing a bridging loan. Is it to secure your dream home before it's sold, to avoid missing out on a good deal, or to facilitate a smoother transition between properties? Understanding your motivations will help you determine if a bridging loan aligns with your goals.

How Much Cash do I Have on hand?

Evaluate your current financial situation and assess how much cash you have readily available. A bridging loan typically covers a portion of the down payment or purchase price, so having some cash on hand is essential. Our Reverse Affordability Calculator in Singapore can help you determine if you can afford your next home.

How Much Cash do I Have on hand?

Factor in all the costs associated with a bridging loan in Singapore, including interest payments, legal fees, valuation fees, and potential penalties for early repayment. Compare these costs with the potential benefits of securing your new home sooner.

What is My Backup Plan?

Consider the possibility that the sale of your existing property might not go as planned. What is your contingency plan if you encounter delays or challenges in selling your current home? Having a backup plan will mitigate the risks associated with a bridging loan.

How to Apply for Bridging Loan

Applying for a bridging loan in Singapore requires meeting certain eligibility criteria, gathering the necessary documents, and following the specific submission process for your property type.

Eligibility

Citizenship: Typically, you need to be a Singapore Citizen or Permanent Resident to be eligible for a bridging loan.
Age: You must be at least 21 years old.
Income: You need to demonstrate a stable income source that meets the lender's requirements. This ensures you have the financial capacity to manage the loan repayments.
Proof of Sale: You must provide evidence that your existing property is in the process of being sold, such as a Sales & Purchase Agreement or an Option to Purchase.
Credit Score: A healthy credit score is crucial as it reflects your creditworthiness and ability to manage debt.

Documents Needed

Identity Proof: NRIC for Singapore Citizens or passport for Permanent Residents.
Income Proof: Recent payslips, income tax statements, or CPF contribution history.
Sales & Purchase Agreement: For your new property, this document confirms your commitment to purchase the property.
Sale Agreement: For your existing property, this document confirms the agreed-upon sale price and terms.
Valuation Reports: For both properties, these reports provide an independent assessment of their market value.

Submission Process

The submission process may vary slightly depending on whether you're selling an HDB flat or a private property:

HDB: If you're selling an HDB flat, you'll need to obtain approval from HDB before applying for a bridging loan. This involves submitting the necessary documents to HDB for review.
Private Property: For private properties, you can directly approach banks or financial institutions in Singapore that offer bridging loans. Submit your loan application along with the required documents to the chosen lender.

It's advisable to consult with a mortgage specialist in Singapore to guide you through the application process and ensure you meet all the requirements for a bridging loan. They can also help you compare loan packages and find the most suitable option for your needs.