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Bridging Loans

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Description

  • A bridging loan is a short-term loan that covers a financial gap between the purchase of a new property and the sale of an existing one.
  • It allows customers to finance the purchase of their new property before selling their existing one.
  • Your customers need to show their capacity to service Interest Only payments on the total debt during the bridging period unless approved by a Credit under a Bridging Period Serviceability Fail exception, however they can make Principal and Interest repayments if they wish

 

Conditions

  • A Bridging loan cannot have a Construction loan feature
  • The Ongoing-Bridging loan or end debt can have a Construction loan feature
  • A Bridging loan must have at least one Purchase Property
  • A Bridging loan cannot have negative benefits claimed on it
  • No additional interest rate discounts are available on the Bridging loan, outside of standard MAV package discount

 

Loan to Value Ratio (LVR)

  • The maximum LVR for a Bridging loan including is 80%
  • Any bridging loan that involves LMI must be referred to Retail Credit Decisioning who will need to submit a request to Genworth for assessment and approval.

 

Features

  •  Customers can make unlimited lump sum payments on the bridging loan.
  • Customers can choose to make Principal and Interest or Interest Only repayments.
  • A Bridging loan can be for owner occupied or investment purposes.

 

Customer Eligibility

A customer must meet all of the following criteria to be eligible for a Bridging loan:

  1. They must be an existing CommBank customer.
    We define an existing CommBank customer as:
    • Having an existing credit facility, i.e. home loan, personal loan, credit card or personal overdraft with CommBank or Bankwest for more than 6 months; or
    • Having an account with CommBank or Bankwest as their salary or income transaction account for more than 3 months.

      Note:
      If the existing Commbank credit facility is not a home loan and your customer is refinancing a home loan from an Other Financial Institution (OFI), they must demonstrate no defaults on their existing OFI Home Loan, Investment Home Loan or Line of Credit in the 6 months prior to firm application date.
  2. They have demonstrated no defaults on their existing CommBank Home Loan or Investment Home Loan or Line of Credit in the 6 months before the firm application date; and
  3. There must be a Ongoing-Bridging loan with Commbank for all Bridging loan applications

 

Loan Options and Structure

  • Standard Variable Rate is the only loan type eligible for a Bridging loan.
  • The bridging period will start from the funding date of the Bridging loan.

You Must:

  • Structure the Bridging loan application as two separate loans:
    • Bridging loan; and
    • Ongoing-Bridging or end debt loan.
  • Issue separate loan contracts
  • Record the loan term as 1 year for the Bridging loan, as your customer must fully repay this facility within 12 months.

Your Customer:

  • Is required to sell the existing property within 12 months of the funding date, otherwise they will be in default of their contract.
  • Must repay the Bridging loan in full.
  • If they decide to keep both properties at the end of the bridging period, you must submit a new home loan application without the bridging feature.

 

Example

Loan 1 - Bridging loan:

  • No additional interest rate discounts available, outside of standard MAV
  • Maximum 1 year loan term
  • Interest only payments available
  • Construction loan feature can't be selected.

Loan 2 - Post-Bridging loan or end debt:

  • Additional interest rate discounts available
  • Maximum 30 year loan term available
  • Interest only payments available
  • Construction loan feature can be selected.

 

Eligible Loan Product

Standard Variable Rate

 

Benefits Policy

 

  • Customers may make unlimited lump sum payments.
  • Customer can choose to make repayment options of principal and interest OR interest only on both loans.
  • Customers have up to 12 months to sell their existing property and repay the bridging portion of their loan. This will be reflected in the Contracted Loan Term.

 

Bridging finance can be considered under the following conditions:
  • Bridging loan can only be offered on Standard Variable Home/Investment Home loan.
  • There is no additional interest rate discount available out of the MAV package discount.
  • Capacity to service interest only payments on the total debt during the bridging period.
  • Capacity to repay the new loan on a principal and interest basis at the appropriate interest rate over the proposed term after the existing property is sold. 
  • For properties that are currently leased, rental income (up to the date of the lease agreement) may be included in the servicing exercise where a formal lease agreement is in place at the time of applying for the bridging loan. Note: If this property is to be sold the income cannot be included in the servicing of the residual debt.
  • A signed contract for sale for the existing property is not required.
  • The maximum LVR for bridging purposes is 80%. All bridging loan applications with LMI must be referred to Genworth. Both properties are usually valued to confirm that the sale property value is reasonable and that the residual property will cover the residual debt.
  • Existing process for calculating LMI premiums is to apply for the calculation of LMI premiums for bridging loans.

 

Note: It is important that customers are made aware that their existing home needs to be sold within 12 months.

 

Bridging Loan Process

Bridging Loan Guide