Bridging Loan Articles

A bridging loan is finance taken out over a short term - usually a time period between 1 and 12 months. Bridging loans are available on both a 1st and 2nd charge basis, meaning that the finance must be secured on a property, but can be taken out in addition to an existing mortgage in the same way as a secured loan. Bridging finance is arranged completely separately from any finance that may already be in place on the property.

This type of finance is available for almost any purpose, although a typical requirement for a bridging loan arises when the borrower needs to raise short-term finance very quickly for a specific purpose. For example, if a property is purchased at auction the borrower may require a bridging loan to cover the time between purchase and arranging a full mortgage. Similarly, if a borrower is moving house and awaiting the sale of their existing property, they may require a bridging loan to enable them to purchase their new house and break a mortgage chain whilst the sale goes through. Alternatively, a bridge may be required if a property buyer is waiting for their mortgage application to complete. This type of finance may also be taken as a short term measure to aide debt consolidation, or perhaps to fund renovation to increase property price prior to sale.

There are a number of bridging finance lenders operating within the UK offering products to suit all circumstances. As the finance is taken over a short term the interest rates are calculated on a rolling monthly basis and range from around 0.75% - 1.6% per month. The rate offered to the borrower will depend on their credit status, the amount they wish to borrow and also the term they wish to take the loan out over. It is possible to exit from a bridging loan arrangement early, although some lenders will impose redemption (or early exit) penalties if a borrower wants to repay the bridging loan over a shorter period of time than originally agreed.

A bridging loan can be processed very quickly, but can be dependant on whether the applicant has already secured a longer-term solution for their borrowing needs. Depending on whether valuations have been carried out prior to application, the finance can be released in as little as 3 days. The average timescale from application to completion is about 7 working days. Bridging finance can be arranged on loan amounts from £25,500, and there is no maximum amount that can be borrowed.

Bridging Loan Articles