- Aaron Bassin says the process of taking a bridging loan can be complicated
- This can be due to complicated systems employed by the big banks
- Non-bank lenders can be used when borrowers are using equity in their homes to facilitate a move
One of the biggest challenges facing property owners when moving house is coordinating the sale of existing property to line up with the purchase of a new dwelling.
Outwardly, bridging loans help with this dilemma, allowing retirees, families, self-employed borrowers and more to use the liquidity in their owned property to acquire a short-term financial runway for the purpose of buying before selling
The process of taking out a bridging loan, however, can often be overly complicated and slow, as a result of the archaic systems traditionally used by big banks – where buyers have typically looked for bridging solutions.
This has created a situation where borrowers face significant anxiety around their offer being beaten by rival bidders with greater disposable liquidity while they await pre-approval for a bridging loan.
The Australian Financial Review and Sydney Morning Herald have each reported this year that some bridging loans can take several months to be approved, leading to financial anxiety and the possibility of homebuyers missing out altogether.
All of this has resulted in a market where homebuyers are stifled, and that’s where non-bank lenders like TechLend have taken the initiative to carve out a niche, providing a useful and necessary solution for property buyers and sellers alike.
What’s being disrupted
The Australian housing market has remained buoyant throughout 2020 and 2021, bouncing back strongly from a brief downturn as the country first entered lockdowns last year, with all markets now seeing consistent and considerable growth.
COVID-19 has also seen a huge increase in Aussies reconsidering where they live and thinking about lifestyle change, leading to a market that is not only hugely competitive but also fast-paced.
This can prove challenging for families or people looking to upsize thanks to their newfound flexible working arrangements, as well as those downsizing into smaller properties.
This is where bridging loans can be vital to securing that dream move, allowing people to make the most of opportunities that pop up, and know exactly what’s next before they depart their current dwelling, with the added convenience and security of moving straight into a new home.
But traditional style bridging loans bring their own issues. Not only do bridging loan processes with banks frequently move at a snail’s pace, but most of these ‘one size fits all’ loans often make it very difficult for buyers to get approved.
Additionally, banks are often not interested in this type of short-term business because the lifetime value of the loan is only for a period of months, rather than 30 years.
All of this has created a significant hole in Australia’s mortgage lending market – a market ripe for disruption.
The solution
Put simply, there’s really very little need for Aussies to engage banks when they are solely looking to use the equity in their home to fund their big move (or small move for that matter). It’s clear that many have been dissatisfied with the banks for quite some time.
The opportunity is huge for TechLend to take the pressure off homebuyers by offering interest-free, paperless, bridging loans with same day pre-approval – ultimately allowing them to buy a new home before they sell their existing one.
The proof is in the unprecedented uptake we’ve seen, with TechLend recently reaching $200 million in bridging loan applications since July 2021.
More and more Australians have taken their savings and nest-eggs away from the big banks, and bridging loans are forecast to be the next area of the financial landscape that will no longer be their domain.
Aaron Bassin is the CEO and Founder of Techlend
