Relocation Loans. What are they?
Often referred to as a ‘bridging loan’ we prefer the term relocation loan. Relocation loans are a short term option. There are a couple of options and things to consider when applying for your loan. In the right circumstances, relocation loans can help with the transition from one home to another, without you needing to sell the home you’re in first. Check out the below and find out whether it’s a good option for you.
If you’re buying a new home
Getting a relocation can assist you with the deposit and stamp duty for a new property and also help with the removalist costs as well as the purchase price on your settlement day of course. With this option you usually have 12 months to sell your current home to repay the advance as such that was loaned for your new home. This can mean avoiding moving into a rental property short term (or worse.. the in laws) and multiple moving fees.
If you’re building a new home
You can also benefit from a relocation loan when building a new home so that you can remain living in your current home until your construction is complete. You generally have 12months after your first building advance for your new loan you then sell your existing loan. Proper planning and preparation is definitely key here.
Do I have to make repayments on a relocation loan?
Nope! This is why for certain circumstances where you cannot afford to be paying off two loans or having the stress of simultaneous settlements so that you don’t have to be out of pocket or making any rush decisions.
You will still be charged interest on the loan which compounds onto your relocation loan so you can choose to pay this if you want along the way then it is only the original debt you are required to pay once you’re ready to pay the loan out/sell your current home. There are some lenders who offer bridging loans, which is basically a similar do require the ‘interest only’ repayment.
We always advise to at least pay off what you would have paying prior to a relocation loan so that you can slow down the interest accumulated over the term of the relocation loan which means you end up with more money in your pocket once you sell your current home.
How much does it cost?
Each lender has different options and fees, however you will find that they are all generally offering a standard variable interest rate, although you won’t see any of your discounts and incentives tacked onto these rates – so you will be paying a higher interest rate – as it is a short term option and the loan will be paid out within 12months.
There can be Establishment fees and monthly fees to consider which can vary from lender to lender and also depends on your current circumstance or option you choose.
Things to consider
100% factor in the Current Market Conditions – this is probably your key thing to consider. You need to be confident that your home will sell in 12months.
If the property market is hot and you have found your dream home and you want to snap it up and sell yours or you are looking to move the family into a new home so that you can style and stage your current home without open homes disrupting the family – then this may be a great option for you. Just make sure you speak to your real estate agent and have a plan in place. Or of course if you’re building and not wanting to rent then these can be good short term options. Again, if you are building you need to know how long your expected build will be from start to finish to ensure that it falls in the timeframes. This brings me back to market conditions. If you’re not selling your current home for a number of months, you need to consider if the market is going to remain the same in your area.
Relocation loans cannot be extended. This is why you must be confident that you are in a position, and all external factors ensure that you can repay the loan within 12months.
As with any financial decision, everyone’s situation is different. Before you decide to take out a relocation loan, have a chat to one of our team members at Nectar Home Loans Hunter to see if you are eligible for a relocation loan and if it is right choice for you.
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