How Much Is A Bridging Loan In Singapore?
Selling old property to upgrade to a new one comes with mixed reactions. You and your family feel happy to move to a different space with finer finishings and maybe a better location.
On the other hand, you might have insufficient money to fund your first payment of the new property, especially if the one you’re selling hasn’t been bought yet.
That’s where bridging loans in Singapore come in. They can help you pay for your new property’s downpayment and part of the total cost.
By getting a bridging loan from a bank, you’ll easily move into your new home even as you await to sell your old one.
Here’s everything about how much is a bridging loan you can get and what to know before getting a bridging loan in Singapore.
What Is A Bridging Loan?
A bridging loan is a short-term loan that covers the financial gap – downpayment and other costs – when buying a new property.
If you’re selling your old home to upgrade or downgrade, you might need funds for the down payments of your new home, especially if you haven’t received the proceeds from your old property sale.
Bridging loans close the financial gap when selling a property and acquiring a new one. With this loan, you use your new property as collateral.
Bridging loans in Singapore have a loan tenure of six months, and the bridging interest rates from banks are 5-6%.
How Much Is A Bridging Loan?
If you’re buying a new property and want to use the proceeds from selling your old property and would love to settle the downpayment using a bridging loan, the first concern is how much is a bridging loan you can get.
Since bridge loans are short-term, you can get up to 25% of the total property cost from non-HDB bridging loans. That means you can get 25% of the property value covered by a bridging loan from the bank.
You can use the 25% bridging loan to pay the downpayment own property or the extra cash to cover part of the property’s total cost.
What To Know Before Getting A Bridging Loan In Singapore
A bridging loan is a sound idea if you want to quickly move into your new home as you wait to sell your old one.
It’s not enough to know how much is a bridging loan you can get and jump right into it. Otherwise, getting the loan can be your worst nightmare.
Instead, carefully check and weigh critical factors before deciding whether a bridging loan in Singapore is the best for you.
Here are the questions that will help you decide if a bridging loan is ideal.
Are There Other Better Options Than Getting A Bridging Loan?
Depending on the status of your old property and the sales process, getting a bridging loan in Singapore can be good or bad.
Let’s consider the following scenarios and see if there could be better options than a bridging loan.
- If you recently renovated your old property before selling it, you can get a renovation loan instead of a bridging loan to settle the downpayment and other costs of the new property. Besides, renovation loans have longer loan tenures and could be cheaper than bridging loans.
- Getting a bridging loan could be a good idea if you’re selling your under collective sale or an en block. With en block sales, you will get a better deal with your property sale which will help you clear your bridging loan easily even when the interest rates are a burden. Getting a bridging loan when selling your old property under the en block sale is also a good idea if you quickly want to move into your new home.
What Is The Total Bridging Loan Cost That You’ll Pay?
Consider the total amount you’ll repay after getting the loan, not just how much is a bridging loan you can get. Interest rates, processing fees and additional charges significantly increase the total loan.
The banks offering loans have different bridging interest rates ranging from five to six percent. Before choosing a bank to get your loan from, carefully check the interest rates and fees, and go for one with the lowest total repayment amount to save your coins.
Smart tip: Use loan calculators online to easily calculate the total loan amount and monthly installments before applying for a bridging loan.
Can You Use Your CPF Savings Instead And Preserve Your Cash On Hand?
Getting a bridging loan is an excellent choice if you have liquid cash but prefer to reserve them. But what if you have enough savings in your CPF OA account that you can use as a downpayment when purchasing your new property?
In that scenario, using your CPF savings instead of a bridging loan is better because of the lower interest rates that CPF offers than bridging loans. Besides, you’ll preserve your cash on hand, which you can use to cover other financial needs or emergencies.
What Other Options Do You Have If You Don’t Sell Your Old Property?
The sole purpose of getting a bridging loan is to cover the financial gap when purchasing a new property and selling your old one simultaneously.
That is, taking the loan in advance and using your proceeds from the old property sale to repay the down payment for your new property.
While it’s good to stay positive that your old property listed for sale would find a buyer, equally think about what if it doesn’t get one. Looking for alternative fund sources in case your property doesn’t sell will save you from the disappointment of not finding buyers.
Most importantly, it will sort out your financial mess if you don’t get the bridging loan.
Therefore, consider other sources of funds and lay alternative plans in case your old property doesn’t sell before taking a bridging loan.
Capitalised Interest Bridging Loans Vs Simultaneous Repayment Bridging Loans
You can get two types of bridging loans: capitalised interest bridging loans and simultaneous bridging loans.
- Capitalised interest bridging loan – A capitalised bridging loan allows you to make only the downpayment of the new property and not part of the mortgage loan. With a capitalised interest bridging loan, you start repaying after selling your property or home.
- Simultaneous repayment bridging loan – Unlike the capitalised interest bridging loan, simultaneous repayment bridging loan allows you to pay the downpayment of your new property or home and part of the mortgage if there’s extra cash. You start repaying immediately after getting the loan while paying your mortgage.
How To Use A Bridging Loan To Lower Your LTV Ratio
If you’re buying a new home and getting a mortgage from the same bank, you can get a bridging loan that you can use to lower your LTV ratio on the mortgage.
Let’s say you’re selling your old property and intend to use the proceeds from the sale to finance your new home.
But at that time, you don’t have enough money to pay for the downpayment. You can take a bridging loan from the bank, which is used to settle the downpayment cost and the remaining paid in installments.
The ordinary way is to take the bridging loan of X amount, divided against your property or home value (the one you are buying) to get your LTV.
After settling the downpayment with the bridging loan, you can use the proceeds from selling your old property to pay the bridging loan.
Suppose the proceeds from sales surpass the bridging loan amount; you can instead use the total amount you’ll get from the proceeds as the initial downpayment, which is your bridging loan amount.
And because the total amount from your old property sale proceeds is higher than the total amount you get from a direct bridging loan, your mortgage will have a lower LTV ratio.
How To Apply For A Bridging Loan
You must be a Singaporean or permanent resident of Singapore to be eligible for a bridging loan in Singapore. A decent credit score from the Credit Bureau of Singapore is also necessary.
DBS, UOB and Standard Chartered bank are some of the banks to get your bridging loan.
Here’s a step-by-step guide on applying for a bridging loan.
Prepare The Required Documents
Gather the critical documents your bank asks for before filling in your application form.
An Option to Purchase (OTP) document is one of the critical documents you’ll be asked for during your application.
You might also need your outstanding loan statements and CPF withdrawal statements. Check the other documents from your bank before applying.
Most banks have websites where you can apply for bridging loans online from the comfort of wherever you are. The online application is fast, and you can check your loan status.
Get Your Loan Approved And Start Repaying
If your application is successful, your bank will notify you, and the approved loan amount will be disbursed to your account.
Depending on the terms and conditions and the bridging loan type you applied for, you’ll start making monthly installments toward the loan.
Apply For A Fast Loan Today Online
Bridging loans are ideal for settling downpayment and other costs before getting proceeds from selling the old property. Despite the high bridging interest rates, you repay the loan within the short tenure of six months, which can save you some money in the long run.
You can borrow money from licensed money lender BST Credit if you prefer getting a personal loan for fear of using your new property as collateral.