What Are Bridging Loans?

The most common use of bridging loans is for people who want to ‘beat’ the housing market – they might have found their dream home, but cannot sell their existing property or they may just be having problems with the imminent sale of their home. House chains can be tricky and can be expensive to navigate, so by using bridging loans a crafty homebuyer can beat the market and get into the home of their choice.

There are two main types of short-term, large loans for homebuyers to choose from - the closed bridging loan and the open bridging loan. Closed bridging loans are the best choice for people who have already exchanged on the sale of their existing property and have a set payback date. These bridging loans are cheaper, as the deal has a lot more security and potential of completion - it is rare for a sale to fall through after an exchange. Even in this tough economic environment, lenders will be happier to lend closed short-term loans.

Open bridging loans are for people who have found the property they want, but have yet to confirm the sale of their house, so there is no set payback date. These loans are harder to get hold of – lenders will want to know why you have not or cannot sell your home and will want to make sure that you are guaranteed of getting hold of a mortgage as and when the deals are completed. There is a lot more risk to these bridging loans, so the rates will reflect that.

People who run their own businesses can also use bridging loans too – they may have to find finance quickly so as to buy bigger premises, invest in new equipment or even hire more people. These loans are very hard to get hold of right now, but with a good adviser and the right answers there are still options for small and medium sized businesses to get credit.

Bridging loans can solve a lot of problems and avoid a lot of wasted time and money. But they are a big risk – for a short time, the borrower is essentially taking on two large loans in their mortgage and their bridging loan. But by using a professional mortgage adviser you can take advantage of bridging loans and make your housing transactions a success.

Bridging Loans are not regulated by the Financial Services Authority.

Bridging Loan Enquiry Form

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