UK Bridging Loan

A Bridging Loan is a short term loan, often used in situations where there is a short fall of cash. They are often used in the purchase of residential or commercial properties, a short term loan (usually at a higher rate) is taken out to cover the financial gap between buying a new property and selling an existing property.

 

If a house purchase arrangement involves the sale of one property and the purchase of another it will normally be most convenient if the two deals are concluded simultaneously. If this is not possible and the purchase of the second property is to be concluded before the sale of the first is completed then additional financing may be necessary. A Bridging Loan can help to bridge the gap between the two transactions. Many lenders will offer Bridging Loans to most people, whether you have a Poor Credit Rating or are Self Employed you can still get a Bridging Loan. The interest you pay on a these sort of loans will be higher than on other types of loan. To obtain a bridging loan you will probably have to have a valuation survey done and repayments are usually made monthly.

A Bridging Loan could help if:
- You are selling your home, are buying another one and your vendor is ready to complete the sale, but the buyer of your present property is in a chain and is not ready to complete.
- You need the proceeds from the sale of your present home quickly in order to complete the purchase of your new home. It could be that if you do not complete the purchase of the new property you run the risk of losing it.

There are two types of Bridging Loans:

• Open Bridging Loan - this comes into action when final terms and conditions have not been agreed. You may not have on the terms by which you are going to sell your home yet but you are still determined that you want to go ahead with the purchase of the property you are set on buying.
• Closed Bridging Loan - When all terms and conditions of both sale and purchase on both properties have been agreed but there is still a delay on moving in, then you can opt to use a bridging loan.

Facts about a Bridging Loan
In the case of buying property, a Bridging Loan is normally secured by getting a mortgage on the new property, and taking out a second mortgage on the property that you are hoping to sell. It could be anything from £10,000, which could cover a short fall to £500,000 or more which could cover an entire purchase. You should realize that the higher the amount, the longer it could take to arrange.

Also, you should expect to pay a management fee, which depending on the size of loan could be 1.5% of the lending per month. The average term of a bridging loan is six months.
A Bridging Loan is a kind of mortgage and as so is secured on your home. Any type of residential, semi-commercial or commercial property or land in England, Scotland and Wales can be considered as security for a bridging loan. It should be noted that bridging loans can be used for many reasons other than buying and selling property. Holidays, Weddings, land purchase, business capital finance, generally they can be used to generate a cash flow that can be used for any purpose.