Bridging Loan

Bridging loan word in a dictionary representing the search for bridging loan facts.

Bridging loan Singapore: Hard facts you need to know

Bridging loan Singapore: What is it and what must you know before applying for it?

A bridging loan is a short-term loan of up to six months that can be used to pay the down payment of your new home or property. This is especially helpful when you are in between the process of purchasing a new property and waiting for the sale proceeds from your existing property. 

For bridging loans, you would only need to pay the interest during the loan period. Once you have received profit from the sale of your existing property, you would need to make a full payment.

When should you get a bridging loan?

Typically, bridging loans are open to anybody who needs financial assistance during any interim period between selling and buying properties. However, there are two distinct situations in which you may want to consider a bridging loan. 

Firstly, when you have a shorter time to complete the property sale (particularly during a property auction) and might need quick funds. Secondly, when your property is part of an en-bloc sale where it might take you more than six months to get your sale proceeds.

How quickly can you get a bridging loan in Singapore?

As the nature of bridging loans is to help borrowers get funds to secure the next property, getting your loan approved is relatively immediate and quick compared to personal loans. If you’re borrowing from a licensed money lender, you can simply apply online and send in your relevant details and an officer will get in touch with you to discuss your financial needs. 

However, if you’re seeking bridging loans from the bank, it may vary accordingly depending on what stage you are currently in terms of any home loan approval process.

Man showing clock in the air with concept of timeliness of loan

How much can you borrow with a bridging loan?

The maximum amount that you can borrow depends entirely on the total sale proceeds and CPF balances you retained after the sale of your previous property. Typically, you can borrow up to 20% of the cost of the new property or 20% to cover the non-cash portion of the downpayment of the property.

What to consider when applying for a bridging loan?

  • Interest rate: The interest rate varies depending on the banks or licensed money lender you go to. In general, banks have an interest rate of 5-6% per annum. 
  • Monthly repayments: You should consider your overheads and how many monthly repayments you can make within six months. 
  • Loan amount: Most bridging loans can cover up to 15-20% of the cost of your new property.
  • Loan tenure: Bridging loan is a short-term loan that takes a maximum of six months. It is mandatory for you to settle the payment within that six months.
  • Riskiness: A bridging loan can be too expensive to take up, given that you only have six months to come up with the remaining principal balance. You have to be certain that you’ll be able to come up with the sales proceeds on time.
Man holding house model and calculating the process of bridging loan

What’s the process of a bridging loan?

You would first need to do some calculations and list out the total cost of a new property, the downpayment for that new property, and the total net sales proceeds you will get from your old property. 

With that in mind, you can then decide if you want to take up a bridging loan to help with paying the down payment for the new property or if you want to take the bridging loan to include a portion of your new home loan as well. Make sure the money lenders you’re enquiring from explain all options thoroughly. 

Types of bridging loans available?

This type of bridging loan covers the entire price of your new property. As the interest applies over the entire loan period, you will only start making repayments (that cover both the principal amount and interest) after you’ve completed the sale of your previous property.

This type of bridging loan ensures that you are able to make simultaneous payments (for home loan and bridging loan) and are given 12 months to sell your previous property to pay off the loan.

Top bridging loans in Singapore?

Dio Credit provides you with the option to apply for a bridging loan to help out with your new property. The loan options are simple, and 100% tailored to match your individual situation so you can spend less time figuring out how to pay for your next property.