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Bridging Finance

By: Emma Eilbeck BA (hons) - Updated: 1 Jun 2019 | comments*Discuss
Bridging   finance  loan  auction

Bridging finance has often been described as the Ferrari of the finance world, it’s fast, expensive and only for those that can afford it.A bridging loan, as the name suggests is a short-term loan which can allow you to buy a property when you may not be able to get a mortgage quickly enough.There are lots of banks out there that offer bridging finance and also a growing number of specialist lenders.

What to use a Bridging Loan for?

Bridging loans can be used in a number of circumstances, one of the most common uses is for buying property at auctions, or using it for property development.For example, you may see your dream property at an auction and decide it’s one that can’t be missed. Your current house may still be on the market though, and you will need to come up with the money quick for the property you have just bought at auction, which is where a bridging loan comes in.

A lender will lend you the money for a short period of time and expect you to have some means of paying back the money in a few months, or possibly weeks.The interest that the lender charges to lend you the money will often be very high, so it is important to make sure you have a way of paying the money back, either by selling a property or by taking out another loan.

Another thing that is worth remembering about a bridging loan is that it will normally be secured against an existing property you have, which means any missed payments could result in your house being repossessed.

The biggest benefit of bridging finance is its speed, it will normally take between seven to ten days to complete a bridge, and there are even cases where a bridging loan can be carried out that same day.

A bridging loan is a means to an end and definitely not something that you want to use to buy a property, unless you already have a property to sell or have some way of paying off the loan in a short space of time.Most bridging lenders should be sensible and only lend you the money if they know you have a way of paying it back.

Using Bridging to Get Out of Debt

It has become increasingly popular for people to use a bridging loan to try and avoid bankruptcy or repossession, this is only advised in certain circumstances and should not be taken lightly.

If you own a property and know that it is going to sell in the next few weeks but you are facing bankruptcy, then bridging could provide a short-term solution to a long running problem.Don’t be fooled into thinking that it would be easy to take the money and run though, it is always advised that you should have a stable repayment vehicle in place before you even think about using bridging.

Bridging loans are rarely used for first-time buyers and should only be used as a last resort, because of the high rates charged.However if you do happen to stumble upon your dream property at an auction and haven’t got time to arrange a mortgage, as long as you have the means to pay off the loan then it could provide a solution.

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