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What Is A Bridging Loan
bridging loan as the name essence when selling one property
implies is a loan used to and buying another. Sometimes if
"bridge" the financial gap you are looking for a new home
between monies required for your and the right property becomes
new property completion prior to available, it is not always
your existing property having possible to wait until your
been sold. current home is sold.
A bridging loan is in simple The beauty of bridging loans is
terms a short-term mortgage that that a bridging loan can be used
is secured against the property to cover the financial gap when
that you are selling, with the buying one property before the
money that is lent being used to existing one is sold. For
complete the purchase of the new example, if you are in a chain,
property. Because of the nature where you are buying a property
of their use, bridging loans can at the same time as selling a
be arranged in a very short property, it's possible that
period of time, usually around you'll be put in the situation
seven to ten days, which is where you need to complete your
important when you need to purchase, but the funds from your
complete on the purchase or risk buyer are not available. You are
loosing the property. now under pressure to complete on
a particular date but do not have
Bridging loans are short term the funds available. This is
loans arranged when you need to where bridging loans come in.
purchase a house but are unable They are looked on as short term
to arrange the mortgage for some lending to cover a specific short
reason, such as there is a delay term need.
in selling your existing
property. Timing is of the Bridging loans can be arranged
for any sum between "£25000 to a The downside to the fast nature
few million pounds and can be of these types of loan is that
borrowed for periods from a week the interest rates charged on
to up to six months. Because of them are relatively high, this is
the nature of bridging loans they because not only are they
can usually be arranged at short short-term and for large amounts,
notice and within a few days. but the risks to the lenders of
Bridging loans are widely non-payment are higher than for
available and can usually be other circumstances and this is
arranged by your existing taken into account when the loan
mortgage provider. rates are calculated. Although
the rates are high when compared
A bridging loan is similar to a to other loans available on the
mortgage where the amount market, when you take into
borrowed is secured on your home account the short amount of time
but the advantage of a mortgage over which this interest is
is that it attracts a much lower charged, and the benefits that a
interest rate. While bridging bridging loan can bring, the
loans are convenient the interest costs are reasonable.
rates can be very high. When
considering a bridging loan Bridging loans are designed to
please remember that you may be provide you with the equity from
paying not only for the bridging your current home in order to
loan but also for the mortgage on make your new purchase, before
your existing property. Although you are able to sell your own
bridging loans are convenient, property. The loan is secured
you need to consider the pitfalls against the home that you are
too, like the high interest selling in the form of a mortgage
rates. or second mortgage, and will
allow you in general to release
around 65% of the property's Despite the costs, bridging loans
value. With these funds you are are very popular, after all if
then in a position to complete you have spent a lot of time
the purchase of the new property, searching for the perfect
and once your old property sells property you will not want to
you can clear the bridging loan. miss out on it because of a
If you are considering such a relatively short delay in the
loan, you should be confident of sale of your current property. It
a sale, and that you will be able is in these cases where bridging
to clear the debt within six loans can prove invaluable,
months, as the high interest enabling you to secure the sale
rates are something that you do of the home that you want, and
not want to be paying long-term. concentrate on the sale of your
property at a later date.
Bridging loans are available to Bridging loans can be provided
the people that have found it for:
more difficult to get mortgages,
such as those with an adverse Residential property
credit rating. This enables these Commercial property
people to build a track record Land
before applying for the New build
traditional mortgage. Bridging Renovations or refurbishment
loans can take from 48 hours at Speculative properties
the shortest to around ten days Conversions
if the circumstances are more Overseas property
complex.
About the Author:
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.
Source: www.isnare.com
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