Bridging Finance or Interest Only loans form short term loan requirements

What is Bridging Finance?

Bridging Finance also referred to as an interest only loan is a short-term loan from 1 month up to 12 months and using your property as security.

What you will learn in this Bridging Finance Guide:

  • What Bridging finance can be used for
  • How does bridging finance work
  • What are the benefits
  • The risks
  • Things to consider
  • The area’s in New Zealand we cover
  • How to apply

What Bridging Finance can be used for?

The most common uses we see for Bridging finance are:

  • Renovations or touch-ups to your property prior to sale
  • Help fund the marketing cost when selling your home
  • Cover the deposit required for the new home you have purchased
  • Clean up existing debt prior to refinancing with your bank or mortgage lender
  • Repay existing short-term debt while selling your property. This helps free up disposable income and takes the stress out of selling
  • Clear mortgage arrears or loan arrears and establish a good repayment history before returning to your bank or mortgage lender

These are just a few reasons for a Bridging Finance loan. If you are not sure if this is right for you feel free to call one of our team on 0800 000 724.

How does Bridging Finance work?

For your Bridging Finance or an Interest Only loan, we use your property as security by the way of registering a caveat over your property. We then calculate your interest-only repayments weekly, fortnightly, or monthly to suit your pay cycle.

With some Bridging Finance Loans, we may be able to do a fully capitalising loan. This means we will add interest to your loan and not take any repayments until the settlement of your property.

What are the benefits?

Using Bridging Finance to tidy up your home for sale, cover marketing costs, or clear some short-term debt can take the stress out of selling or refinancing your home. It can also help you get the best price.

What are the risks?

  • Home does not sell in time – We can always look to extend the term or put the loan on a Principal & Interest term until the property does sell.
  • Bank or Mortgage Lender is not ready to refinance our loan – Again we can look to extend the term or put the loan on a Principal & Interest term until they are ready

Why use Pioneer finance for Bridging Finance?

The reasons to use Pioneer Finance when needing a Bridging finance loan are:

  • We are fast and flexible
  • Often we can have your loan approved within hours. In some cases, we can have the loan paid the same day
  • You can get a competitive interest rate

What to consider?

  • How long you will need the Bridging Loan?
  • Will it take long to get the property ready for sale?
  • What is the length of time properties are taking to sell in your area?
  • Will I be able to meet the repayments of the Bridging Loan?
  • Once the work on my house is done, do I still want to sell?

What areas in New Zealand do you cover?

That’s easy we cover the main centres Auckland, Hamilton, Tauranga, Rotorua, New Plymouth, Taupo, Gisborne, Napier, Palmerston North, Wellington, Nelson, Christchurch, Queenstown & Dunedin.

My property is not in one of those areas? No problem we can look at any property in New Zealand on a case-by-case basis.

How to apply

You can apply for a bridging loan with Pioneer Finance if you are:

  • Over the age of 18; and
  • A New Zealand Citizen, Permanent Resident, or in some instances on a work visa; and
  • Are employed or have a regular source of income i.e Job, Self-employed, or receive a benefit

You do need to show that you have the affordability for the loan and that you are who you say you are. You can do this by providing the following:

  • Proof of Identity – i.e passport or driver’s license
  • Proof of Address – Bank statement, utility bill or a letter from a government department
  • 3 Months bank statements

Bridging Finance Fees and Charges

Bridging Finance loans will have various fees attached, which may include:

  • An establishment fee once your loan is approved and you have accepted the terms
  • Ongoing monthly account fees
  • Security registration fees
  • Caveat registration fee
  • Penalty fees for late payment
  • Early settlement fee
  • Caveat removal fee
  • One-time broker fees if using a finance broker

Some of these fees will be charged to the loan upfront or are calculated in your weekly, fortnightly, or monthly installments. Other fees can be charged at the end of the loan term such as early settlement fees or if you used your property as security a caveat removal fee can be charged.

For more details on our fees and charges go to our Interest rates and fees page in the important information section.

Bridging Finance Repayment Example:

Amount Borrowed $100,000.00

Establishment Fee $780.00

Caveat Fee $165.00

Total including fees and insurance $100,945.00

Interest Rate 12.95%pa

Monthly Account Fee $12.00

Loan Term 12 Months

11 Monthly repayments of $1,101.09 plus 1 final repayment of $102,046.00

The above is an example of a common loan request and gives you an indication of what the monthly loan repayments will be. Your establishment fee may be different depending on the security used and the time is taken to process your application. We would also like to point out that the Payment Protection Insurance used in this quote is not compulsory.

Bridging Finance Loans summary

In summary, bridging finance loans with Pioneer Finance:

  • Are fixed-term, fixed-rate secured loans
  • Arranged online, over the phone, in one of our two branches in Wellington & Auckland, or through a finance broker
  • Repayments can be made weekly, fortnightly, monthly, or capitalised to the loan
  • Interest rates range from 11.95%pa to 27.95%pa
  • Loan terms can be from one month to 12 months in length
  • Can be used to consolidate personal loans, credit cards, store cards, or any bills that need to be caught up
  • You can also use the funds to prepare your property for sale

If you are over the age of 18 (up to the age of 21 you may require a guarantor), a permanent resident of New Zealand, earn a regular income, and can demonstrate the ability to repay the loan, you may qualify for a Bridging Finance loan.

We offer loans from $5,000 to $100,000 on a bridging finance loan in New Zealand. The amount we lend does depend on the security offered for the loan. The more security offered the better chance we will be able to lend the amount you require. We will also need to check your affordability and credit profile.

Approval time depends on some variables:

  • How much information you provide, the more information you provide the quicker we will be able to give you an answer.
  • Larger loans tend to take a little extra time
  • Loans with property involved can also take a little longer to get approved

In saying that we do endeavour to give a same day answer on all applications received.

Yes, you can make extra repayments; or you can increase your minimum repayment to help pay your loan off earlier. We do charge a small early settlement fee of $75.

Applying at multiple finance companies will no longer affect your credit rating in New Zealand. Since October 1st 2019 every credit check done by a finance company is listed as a quote with Equifax, Centrix or Illion and will only affect your credit rating should you accept the loan offer.