A passage property loan, also known as a passage of title loan or property bridging loan, is a specific type of short-term loan that is used to finance the purchase of a property while the loan on the previous property is still being cleared. This type of loan is often used in situations where the borrower has already sold their previous property but is waiting for the completion of the sale, and they need to use the funds from the sale to purchase a new property.

Key characteristics of a passage property loan:

• Short-term loan: Passage property loans are short-term loans, usually lasting between 1-12 months.
• Temporary financing: The loan is used to bridge the gap between the sale of the previous property and the purchase of the new property.
• Collateral-based: The loan is typically secured against the new property, which is used as collateral.
• Interest rates: Interest rates for passage property loans can be higher than traditional mortgage rates, reflecting the higher risk associated with this type of lending.

• Sale of previous property: The borrower sells their previous property, but the funds from the sale are tied up in an escrow account until the sale is finalized.
• Purchase of new property: The borrower wants to purchase a new property, but they need access to the funds from the sale of the previous property to complete the purchase.
• Passage property loan: The borrower applies for a passage property loan, which is secured against the new property.
• Loan approval: The lender approves the loan, and the borrower receives the funds to complete the purchase of the new property.

• Avoids the need for two separate mortgages: The borrower only needs to secure one loan, rather than two separate mortgages.
• Reduces risk: The borrower is not exposed to the risk of paying two mortgage repayments simultaneously.

• Higher interest rates: The interest rates for passage property loans can be higher than traditional mortgage rates.
• Fees and charges: The borrower may be charged fees and charges for the passage property loan, such as application fees and origination fees.
• Credit risk: The lender takes on credit risk if the borrower defaults on the loan, which can result in a loss for the lender.
• Collateral risk: The lender takes on collateral risk if the borrower defaults on the loan and the lender is unable to recover the outstanding loan amount from the sale of the collateral.