Become a Bridging Loan Badass with Our Helpful Guide

Date Posted:
February 17, 2023

To find the perfect loan for your situation, it's important to understand what bridging finance is and how it works. It is a type of loan that offers quick access to funds and is usually used when one needs a short-term cash boost. Additionally, it is important to recognise the risks of this type of borrowing before committing to a loan.

A bridging loan is a temporary mortgage to cover the financial gap between purchasing and selling properties. It is typically used when someone is in the process of buying a new house before they can sell their existing one. This arrangement typically lasts 12 months and can often be set up quickly, especially if you’re working with a bridging loan broker.

Other Purposes

Bridging loans are not just a type of financing that can be used by not only homebuyers but also investors and property developers. It provides a short-term solution to a transaction gap that may occur in a real estate transaction.

When someone buys a property at auction, they usually have to finish the purchase within 28 days. This timeframe needs longer to get a regular mortgage, so a bridging loan is used instead. Once the purchase is complete, the buyer can apply for a traditional mortgage.

Bridging loans are also useful for:

  • Renovations.
  • Unmortgageable properties.
  • Short-term leases.
  • Time-sensitive transactions.

Are They Secure?

Yes, they are. Bridging loans require you to pledge an asset as collateral. This means the lender can take legal action to recover the loan by selling your property if you don't meet the agreed repayment terms.

A bridging loan will be considered a first-charge loan if there are no other loans or mortgages on the property. The bridging loan will be paid before other debts if the property is sold. If you have a loan on the property, the bridging loan will be a second-charge loan and will be paid after the mortgage when the property is sold.

Since this is secured against a property, you may still get the loan even with a poor credit score. The amount you can borrow can range from £5,000 to £25 million or more, depending on the value of the property you put up as collateral. If you don't repay the loan as you have agreed, your property can be taken away.

Where Can You Get One?

Specialist lenders, or bridging loan brokers are some of the few institutions that can provide you with one. 

However, due to their short-term nature, bridging loans are generally more expensive than other types of mortgages and loans. Interest rates range from 6–20 percent per annum. Interest rates can be fixed or variable.

In Summary

Bridging loans are a versatile solution for personal, commercial, or other financial needs. They can provide access to funds between house sales or even put up cash for renovations. However, their functionality is reflected in the costs—up to ten times more expensive than conventional loans. Always consult a licensed agent or broker to determine if this product is right for you.

Contact Property Link Homes to Learn More

We’re a bridging loan broker that provides homeowners with practical, informed advice on getting cash quickly—whatever your needs. Speak to one of our experts by dialling 01765 360058 or emailing [email protected]

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(Above Joplings)
01765 360058
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