What is a bridging loan?

As you might have guessed, a bridging loan is a type of loan
that =EBbridges’ the financial gap between selling your house and
buying a new one. If you have found the house you want but are
unable to get a mortgage for it because you are yet to sell
your old property, then a bridging loan might be the answer.
These loans are short-term and are used to buy a new house or
raise capital prior to a house sale. You can usually get
bridging loans for =A325,000 up to a few million, depending on
your circumstances and needs. Loan terms usually range from one
week to six months, depending on how long it will take you to
get the money from your sold property.

Getting your new house quickly

The reason why bridging loans can be advantageous is that they
allow you to remove the problem of housing sales chains, and
buy the house you want straight away. This stops you from
missing out on your dream home, and will then allow you to
concentrate on selling your old property.

Costs of a bridging loan

Although bridging loans are secured in the same way as a
mortgage, the interest rates are much higher. You are paying
for the convenience of the loan, and so the shorter the term
you can take the better. Also, you need to remember that you
will have to pay both the bridging loan and your old mortgage
at the same time. This can be a serious financial burden, and
you need to think carefully before taking out one of these
loans.

House won’t sell

Although bridging loans are good if your property is going to
be imminently sold, they can become serious problems if you
cannot sell your home. You will be left with the bridging loan
at a high interest rate, as well as your mortgage. This could
leave you unable to make repayments, and you could lose both
your old and new homes. Make sure that you have plans in case
your property does not sell for a while. Only try and take
bridging loans out when you have firm buyers.

Who should get a bridging loan?

Virtually anyone who has a property and is looking for a new
one can apply for a bridging loan. The loan is secured against
property, so even people with poor credit can get hold of such
a loan. These loans are extremely flexible and can help you
secure a new home quickly, but you need to take into
consideration the high interest rates and the possibility that
you current house will not sell.

About The Author: Peter Kenny is a writer for The Thrifty Scot,
please visit us at http://www.loanwize.co.uk and
http://www.thriftyscot.co.uk/Loans/

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