If you are looking to buy a home before you sell your existing one you may need a relocation loan also referred to as 'bridging finance'.

Today's bridging/relocation loans are usually at the Standard Variable interest rate, which has made them more popular and affordable.

The lender will advance you funds to cover the full purchase price of the new property and associated loan costs. The lender will then take security over both your existing home and the new property. If you have any loans on your existing home, the lender also takes over these loans by paying out the existing lender.

The term of the relocation period is usually 6-12 months from the day of settlement. During this period the lender expects you to sell the home you have moved out of.

Most lenders will give you the option of structuring your loan repayments to suit your budget. Some lenders will allow you to capitalize some or all of the payments onto the original loan amount during the relocation period.

Your application for a relocation loan will be submitted to the lender and assessed under the normal guidelines. However, loan serviceability, will be based on your capacity to service the debt.

Some lenders look at end debt (the amount owing after you sell your existing home), others consider peak debt (the entire loan amount including all mortgages).

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