This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business, or perhaps paying for a renovation.
Another example of when you may need one would be if you want to buy a second property before you've sold your first.
Or you may need one if you're buying property at auction
As they are more risky for the lender than the usual house buyer’s loan, bridging loans are more expensive and should only be used where you are fairly certain to repay them within about 6 months.
Depending on the lender, a Bridging Loan can be obtained by the self employed or people with bad credit. In other words to those who traditionally have found it more difficult to get loans and mortgages.
How they work
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 being sold.
In this case the loan will depend on a positive valuation of the relevant properties.
Lenders will usually allow Bridging Loans of up to 65% of the value of the properties - less any existing mortgage. But this will depend on the lender so you can shop around for better deals.
You can usually borrow between £25,000 to £500,000
It is important that you take legal and financial advice before entering into a bridging loan agreement.Fees, charges and interest may vary considerably. Always ask a solicitor before signing anything. |
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