Bridging loan, construction loan & equity loan.
Many people refinance their home loan because they’re looking for a lower interest rate, lower payments or more flexibility. If that is your goal in refinancing, then you have a wide range of products to choose from. However here we look at some specific mortgage refinancing options people use to deal with some common situations.
Equity loan or line of credit (LOC)
All in one account
If you want to buy a new home, but you have not yet sold your existing home, you could use a bridging loan to tide you over. The maximum you will be allowed to borrow during the bridging period is generally limited to 80% of the combined value of both properties. Bridging loans tend to be at a higher interest rate than normal loans. But when you have sold your original home and repaid that mortgage, you can revert to a loan product with a more favourable rate.
Construction loan or renovation loan
With a normal loan, you borrow the whole amount up front – and start paying interest from day one. The advantage of a construction loan or renovation loan is that you only draw down money as you need it to make progress payments. This can significantly reduce your interest payments.