As more Australians look to upsize, downsize, or relocate in a fast-moving property market, bridging finance is emerging as a critical – yet often complex and misunderstood – tool to help borrowers make their next move. We sit down with Athena’s chief product officer, Mira Hohn, to unpack what’s happening in the property market, why so many Australians feel “stuck”, and how Athena has worked with brokers to create an innovative new bridging solution to help clients navigate and realise value in buy-sell decisions.
Q. You recently launched a new bridging product coupled with a scenario modelling tool available to brokers aggregating under LMG and Mortgage Choice. Why did you do this?
Recent research from REA Group shows that every year, 1.8 million Aussies want to make a move, but less than a million of them actually do so.
We realised that most people think there is only one process, which is selling their current property, then figuring out how much money they have before going to buy a new one. They’re worried that if they sell first and then buy later, they could be at a different footing in the market or could even move from becoming an owner to becoming a renter.
The research also showed that seven out of 10 Aussies want to be able to buy before they sell, but they just don’t feel they’re equipped properly with information and the right product solution to be able to achieve this.
All of this results in so many Aussies feeling stuck – not making a move – and that’s locking up the market. Our goal with our innovative solution is to really free up the market to help Aussies make more moves and to provide some really great experiences for brokers and Australians as part of that.
Q. What makes Athena’s bridging loan product special?
We’ve really tried to ensure each of our policies does something quite different.
Typically, lenders will shade the current property by anywhere up to 20 per cent – sometimes more. We shade that to 5 per cent. The difference that additional equity makes to the size of the loan is quite significant.
We go up to 85 per cent loan-to-value ratio (LVR) where there is a contract of sale. Most lenders stick to around 80 per cent.
Our bridging loans go for 12 months, but when we think about the interest that’s being capitalised, we’ve allowed flexibility from anywhere from six to 12 months, depending on the intentions and the pace that the borrower is working at.
We also allow capitalised interest to sit on top of the peak debt, so that can often get a loan to go up to 83 per cent.
We’re also very flexible with how many different parties (for example, friends that might be investing together), structures, and different properties come into the mix. We allow multiple properties and cross-collateralisation of securities to support that bridge. And we have a single application for the bridge.
Plus, our bridging loans include a fully functioning offset, with multi-offsets available.
All of those things come together to really help maximise borrowing power and how much someone can get for their next property.
And, we have a really good upfront with no clawback (where there is no end debt).
Q. How are you helping brokers navigate the different bridging finance options to their clients?
Brokers used to hate doing bridging loans… they were pulling from multiple spreadsheets, looking at many different property data sources. Half the time it was actually not even worth them doing the work because the products and the policies that existed were quite restrictive for bridging (particularly for upsizing and in some cases for downsizing).
We’ve co-created our new bridging finance product and scenario modelling tool with over 50 brokers at LMG and Mortgage Choice networks. So many of these brokers told us that we’ve not just solved one or two of the pre-existing issues with bridging, we have solved all of them.
The modelling tool makes it very simple and easy for brokers. It turns what used to be hours of patching together all of that deal work into a couple of minutes.
Q. What does the scenario modelling tool do?
We allow for four different scenarios to be played back to the client and the broker: buy before you sell, sell before you buy, simultaneous settlement, or keep both.
We use the client’s individual circumstances to bring together those different pathways and show brokers what each move would look like. They can look at the client’s current and future properties, the client’s specific timing, and then the cost of the bridging loan versus the net difference in market movements.
We also set out, at a more qualitative level, some of the pros and cons of each of those approaches. For example, the borrower might have more storage costs if they are selling before they buy.
The scenario tool allows brokers to pull in real-time Proptrack data from realestate.com.au and help set a view as to how long they think it will take for the client to sell and what price.
What’s really important is it plays out the end real life position for the client, not just the credit assessed position, which are often very different things. We provide a month-by-month view on repayments and how much interest is capitalised over the months, what net sales proceeds will be, etc.
The broker can then save that for their records and come back to it whenever they want. They can share that link with a BDM or with the credit team to start to workshop these deals, which is really cool.
We’re not actually trying to push bridging loans in this tool, we’re trying to help Aussies make more moves in the way that suits them. It’s about simplifying the complex to empower Australian property owners.
Q. What kind of deals have you been seeing since launching the new tool and bridging loan products?
A little bit of everything, but a majority of deals with end debt, so upsizers and relocators. We’re seeing some downsizers as well. What’s interesting is that there have been some quite large loan sizes of the bridge as well.
We are incredibly proud of what we have built with brokers as it’s a genuine solution for their clients. Bridging has long been viewed as a last resort, but we are here to change that. Athena is at her best when delivering market-leading digital experiences coupled with progressive products, co-created with the real experts – brokers. Ultimately, this is about unlocking the market for Aussies and providing really great experiences for brokers as part of that.
Mira Hohn
Chief product officer, Athena Home Loans
Tune in to hear more!
Find out more from Mira Hohn about how to unlock movement in the property market in the In Focus podcast episode, sponsored by Athena Home Loans, here:
Click here to listen on your device
