A bridging loan is a short-term loan used until an individual or company secures permanent financing. They are basically short term, up to a year, and are used in changing real estate. As a homeowner, you can use bridging loans to purchase a new home while waiting for your current home to sell.
Property buyers usually use this loan to bridge the gap between purchasing a new property and capital release from an existing property. Lenders offer bridge loans to borrowers who have excellent credit ratings and significant home equity.
This loan comes at a higher interest rate than on mortgages. With a bridging loan, you can borrow up to 80% of your equity. Compared to traditional loans, bridging loans have a faster application, approval, and funding process. You could use the equity in your current home for the down payment on your purchase of a new home.
A closed bridging loan involves you knowing how you will pay the loan exactly. You will have
to let the lender know the funds you will be using to pay off the loan (exit plan). Most times, closed loans are settled within a few months. On the other hand, an open bridge plan is used
as a means to get funds for an urgent transaction and does not require an exit plan. You will
not need to give a detailed list of how you will pay the loan, and you have up to a year to repay.
Bridging loans can be taken by property developers and investors, businesses, homeowners, and property owners. With a bridging loan, you enjoy an element of peace of mind and convenience in the case where your family needs to move quickly. However, it acts as a
cash injection and not a replacement for a long-term solution.
At the Mortgage Brigade, we understand the process involved in taking a bridging loan, and
we have expert brokers to arrange the loans just as required.