Bridging loans are a short-term funding option. They are used to plug the gap between a debt that needs to be paid and a longer term line of funding becoming available. A classic example would be a chain break: where a house needs to be purchased prior to the completion of the clients sale. Unlike a standard mortgage this type of loan is often spanned across two securities (usually the sale property and the purchase property) hence the term ‘bridge’.
As well as assisting a home mover this type of loan can be used by a someone who may wish to refurbish a property before quickly selling it on, fund a property bought at auction, or purchase a property that the high street banks will not finance.
The uses for bridging extend well beyond the remit of a purchase – if a client needs money for a tax bill, to purchase a piece of land, help with the cash flow of their business or perhaps put an extension on their home – we can help.
The key thing when looking at the plausibility of a bridging loan will be the exit strategy. This could involve getting a mainstream mortgage or a buy-to-let mortgage or indeed selling the property altogether.
Bridging loans have a reputation for being expensive – while it is true they are pricier than a mainstream mortgage the reality is they are a short term option. With rates starting from just 0.44% a month (5.28%) p/a it could be a lot better value than you thought!
What is undeniable is that bridging lenders come in all shapes and sizes. This ranges from smaller family lenders to large banks regulated by the Financial Conduct Authority (FCA). It is therefore essential to seek professional advice from a Directly Authorised FCA-regulated broker such as One 77. Not only will we recommend the most appropriate product – but we will not charge you a fee for doing so. Can’t say fairer than that.