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What is a Bridging loan?
A bridging loan can be used for a variety of purposes, the following list being just a few examples
· To enable the purchase of one property before the completion on the sale of another.
· To fund the purchase of a property abroad. We are happy to provide funding for the purchase of properties abroad, be they for own occupation or holiday/investment purposes.
· Temporary funding for the purchase of a 'defective' property, pending completion of repairs and draw down of a long-term mortgage.
· To fund the urgent purchase of a property, pending arrangement of a long-term mortgage. This of course can apply to an investment property when there is insufficient time to arrange a buy to let mortgage to complete the purchase.
· To capital raise for any purpose, pending a sale of the security property.
· Distress refinancing to enable a property to be sold in a controlled manner (as opposed to a forced sale).
Probably the most common use of a Bridging loan would be connected to buying a property. A Bridging loan gives you an agreed amount to help you bridge the gap between selling and buying your property.
Two types of Bridging loan are available.
Open Bridging loan
This type of Bridging loan is available when you have not yet finalised the terms on which you are selling your own home, but are going ahead with the one you are buying.
Closed Bridging loan
This type of Bridging loan is available when you have agreed the terms on the home that you are buying and the one that you are selling, but there is a delay in moving.
Availability and rates of Bridging loans
There are many providers of Bridging loans in the market place your bank would be a good starting point should you wish to raise this type of loan. Many high street lenders offer you these loans and of course the Internet would be a good place to compare rates as most companies advertise their rates on the Internet.
Rates available are linked to a Bank of England base rates and dependant on repayment terms an additional 1 or 2 will be added to the rate and charged until repaid. See typical example below.
Open Bridging loan - Base Rates + 2%
Closed Bridging loan - Base Rate + 1%
In addition to these low rates there is also an arrangement fee:
How much can I borrow?
Should a lender agree to advance a Bridging loan then the amount lent will depend on the assessment of your financial position. The provision of credit is subject to status and you must be 18 or over to apply and at the date of the expiration of your loan, under 75 years of age.
PLEASE REMEMBER YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.
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