What is a bridging loan?
A bridging loan is short-term loan, that helps customers “Bridge the gap” for many different purposes, until you can clear the loan in full or secure a more permanent form of finance.
If you are using your residential property as the security, you can look at a maximum of term of 12 months. When you are raising on an investment property the maximum typical term is 24 months.
Bridging loans are priced monthly as opposed to annually. Although interest is charged monthly, it is normally 'rolled up' and repaid at the end of the loan term along with the initial loan borrowed and any associated fees added to the loan.
Why take out a bridging loan?
Bridging loans are used for many different purposes but are commonly used for:
- Buy a property at auction - you normally have 28 days to complete on your purchase. A bridging loan would be used to purchase the property until you were able to exit the bridging loan by either remortgage or sale of the property, if it was bought as an investment.
- Chain break – is a short-term solution which enables home buyers to complete a property and move home, while their existing property is still on the market – hence 'breaking' a chain.
- Development finance – is a funding option, It is designed specifically to assist with the purchase costs and build costs associated with a residential or commercial development project. This can be building your dream home from the ground up, conversion or refurbishment covering a single unit through to multiple units built across several phases.
- Completing renovations – via a bridging loan will allow you to complete work on a property before it is sold or if a property is not mortgageable, it would allow you to complete the work before you refinanced or sold the property.
- Purchasing an investment property - A bridging loan would be used to purchase the property until you were able to exit the bridging loan by either remortgage or sale of the property
