What Is a Bridging Loan and How Does It Work for Private Property Sale and Purchase in Singapore?
If you’re planning to upgrade from one private property to another, one of the biggest challenges is managing the timing between your sale and purchase. You may face a scenario where you’ve found your dream home but haven’t sold your current one yet. That’s where a bridging loan can come in handy.
What Is a Bridging Loan?
A bridging loan is a short-term financing solution that helps homeowners "bridge the gap" between the sale of their existing property and the purchase of a new one. It’s commonly used when the sale proceeds from your current home are not ready in time to meet the payment deadlines of your new property.
Bridging loans are typically offered by banks and financial institutions and are secured against your existing property.
When Should You Consider a Bridging Loan?
You may consider using a bridging loan if:
You’ve found a new private property and want to secure it before selling your current home.
You need funds to cover the downpayment for the new property.
How Does a Bridging Loan Work?
Here's a step-by-step overview:
Sell Your Current Property: You may already have a buyer, but the proceeds are not disbursed yet.
Buy a New Property: You want to commit to a new private property before your existing home’s sales proceeds are in.
Apply for a Bridging Loan: You can borrow the amount you expect to receive from the sale to fund the purchase of your new home.
Complete the Purchase First: With the bridging loan, you’ll complete the purchase of your new home first.
Repay the Loan Later: Once the sale of your current property is completed, you use the proceeds to repay the bridging loan in full.
Most banks allow up to 6 months repayment period, and the loan is usually structured as an interest-only loan for this short duration.
Types of Bridging Loans in Singapore
There are typically two types:
Capitalised Interest Bridging Loan: You only pay interest after the sale is completed. Both the principal and accrued interest are repaid at one go.
Simultaneous Repayment Bridging Loan: You pay interest monthly on the bridging loan while still servicing the new home loan.
Key Considerations Before Taking a Bridging Loan
Loan Eligibility: Subject to Total Debt Servicing Ratio (TDSR) and loan quantum limits.
Interest Rates: Bridging loans typically carry higher interest rates than regular home loans.
Repayment Period: Ensure your sale transaction is likely to complete within the bridging loan tenure.
Is a Bridging Loan Right for You?
A bridging loan can provide peace of mind and flexibility, especially in a fast-moving property market where good units get snapped up quickly. However, it’s important to work with a trusted real estate agent and mortgage advisor to ensure the timing, calculations, and structure of your sale and purchase are well-aligned.
If you're planning to sell your current private property and buy another, let’s have a chat. I’ll help you plan your timeline and finances strategically — so you can upgrade smoothly, without unnecessary stress or financial risk.
