How do bridging loans work?
Bridging loans are available to developers who are producing development stock (residential apartments, townhouses, land subdivisions, industrial property).
Historically, the person or company applying for short term property loans in Australia needed to meet high standards of creditworthiness or have low loan-to-value ratios (LVRs) to qualify. But as bridging loans have become more popular, they have become more accessible to developers.
Bridging finance repayment terms may be flexible. For example, the lender may offer a term of three, six or 12 months and allow the borrower to repay the loan anytime within that period.
Lenders may charge higher interest rates for short-term property funding than they would for long-term property funding. But because you’re paying it for a shorter period, and can settle the loan sooner, it probably won’t cost as much as taking a loan over a longer period.