Why should tutors consider Bridging Finance for construction?

As a tutor, you've likely considered property investment or building your dream home while maintaining your current residence. Bridging Finance offers a strategic solution for education professionals who need cash flow support during construction phases, allowing you to manage multiple property commitments without compromising your financial stability.

What is Bridging Finance and How Does It Work?

Bridging Finance represents a short-term financing solution that helps bridge the gap between buying a new property and selling your existing one. For tutors undertaking construction projects, these loans provide crucial cash flow support during the building phase when expenses are high but income may be irregular.

The loan term usually extends 6 to 12 months to sell existing property, though this can extend to 12 months if new property is being built. This timeframe allows sufficient flexibility for construction completion and property settlement.

Key Benefits for Education Professionals

Tutors face unique financial circumstances that make Bridging Loans particularly valuable:

• Seasonal income patterns: Many tutors experience varying income throughout the year, making traditional financing challenging
• Investment opportunities: Access to property markets without waiting to sell current assets
• Construction timing: Ability to commence building projects without timing constraints
• Market positioning: Opportunity to secure properties in competitive local property markets

Understanding Peak Debt and End Debt Calculations

When applying for a Bridging Loan, lenders assess your Peak Debt and End Debt positions:

Peak Debt represents the maximum amount owed when you hold both properties, including the contract purchase price of the new home plus your existing mortgage balance.

End Debt reflects your position after selling the original property, typically just the new property mortgage.

Lenders evaluate your borrowing capacity based on these calculations, ensuring you can service both scenarios comfortably.

Interest Rate Structures and Repayment Options

Bridging Loan Rates typically operate on either variable interest rate or fixed interest rate structures. Variable loan rates fluctuate with market conditions, while fixed interest rate loans provide certainty during the loan term.

Many lenders offer Interest Capitalisation, meaning you don't make monthly principal and interest repayments during construction. Instead, interest accumulates and is added to the loan balance, improving cash flow during the building phase.

Loan to Value Ratio and Lenders Mortgage Insurance

The loan to value ratio (LVR) significantly impacts your Bridging Loan options. Most lenders require:

• Maximum 80% LVR to avoid lenders mortgage insurance (LMI)
• Some lenders accept higher LVRs with LMI coverage
• Construction loans may have different LVR requirements
• Combined LVR calculations across both properties

Application Process and Documentation

The application process for Bridging Finance involves comprehensive documentation:

1. Income verification: Bank statements, tax returns, and employment contracts
2. Property valuations: Both existing and proposed properties
3. Construction contracts: Detailed building agreements and progress payment schedules
4. Financial statements: Complete overview of assets and liabilities

Many lenders now offer a streamlined application process for qualifying borrowers, reducing approval timeframes.

Should You Buy or Sell First?

This common dilemma affects many tutors considering property moves. Factors to consider include:

• Market conditions: Current local property market trends
• Stamp duty: Additional costs when buying before selling
• Financial situation: Your capacity to service multiple loans
• Interest rate discounts: Potential savings through loan consolidation

Getting Pre-Approved for Bridging Finance

Loan pre-approval provides significant advantages when planning construction projects. Getting pre-approved allows you to:

• Understand your Bridging Loan amount capacity
• Negotiate confidently with builders and vendors
• Plan construction timelines effectively
• Access Bridging Loan options from banks and lenders across Australia

Maximising Your Investment Strategy

Consider these additional features when structuring your Bridging Loan:

Offset Account: Link your savings to reduce interest charges during construction

Investment Loan Structure: If retaining the original property as an investment, structure loans appropriately for tax benefits

Home Loan Integration: Plan how the bridging facility will convert to standard home loan terms

Bridging Finance provides tutors with valuable flexibility during construction projects, enabling you to manage cash flow effectively while building your property portfolio. The key lies in understanding your financial capacity and working with experienced mortgage brokers who can access comprehensive Bridging Loan options from banks and lenders across Australia.

Call one of our team or book an appointment at a time that works for you to discuss how Bridging Finance can support your construction and property goals.