Bridging loans, bridging mortgages and bridging finance

What is a bridging loan?

A bridging loan (also known as a ‘bridging mortgage’ or ‘bridging finance’) is a loan designed to ‘bridge’ the gap between buying a new property and selling one you currently own.

The bridging loan releases the funds from your existing property right now, allowing you to buy the property you want without waiting to sell it. Once your property is sold, you repay the bridging mortgage, along with any interest.

Because bridging loans are designed for people who need cash right now, they can often be sorted out more quickly than traditional mortgages – potentially in as little as a few days. However, this convenience does come at a cost, in the form of higher interest and fees.

Since bridging loans are relatively short-term, interest and fees are usually charged monthly rather than annually.

If you already have a mortgage on your home, your bridging loan will be known as a ‘second charge’ loan. Here, the idea is that your first mortgage has first call on the value in your home, while the bridging loan has second call. In other words, if you couldn’t meet your repayments and your property had to be sold, your existing mortgage would be paid off first.

How long do bridging loans last?

As its name suggests, a bridging loan is usually a short-term arrangement. Most bridging loans are for a few months, or a year at most.

Some bridging mortgages have a fixed repayment date. These are known as ‘closed’ bridging loans.

Other bridging mortgages are more flexible, and you can repay them at any time during the loan period (usually a year). These are known as ‘open’ bridging loans.

Depending on the loan, you may have to pay a fee for paying off your bridging loan ahead of time – just as you do with traditional mortgages.

Even though bridging loans are usually short-term, the borrowing is still secured on your property. So you need to keep up payments on your bridging finance, just like you would with a standard, longer-term mortgage.

Why would I need a bridging loan?

The usual reason for taking out bridging finance is to allow you to buy a property straight away, without having to wait for your own property to sell.

For example, you might find the ideal house up for auction, and make a commitment to buy it immediately, even though you don't yet have a buyer for your current home. A bridging mortgage could give you the money you need.

You could also use bridging finance to secure the cost of a major renovation, or buy land where you plan to build your own home.

Bridging finance: questions to consider

• How much do you need to borrow, and for how long?
• How quickly do you need the money?
• Can you commit to repaying the bridging loan within a certain timeframe, or do you need more flexibility?
• What is your backup plan if you can’t repay the bridging loan at the end of its term?
• Do you already have a mortgage on the property to be mortgaged? In other words, will this bridging mortgage be a ‘second charge’ loan?

How we can help with your bridging loan, bridging mortgage or bridging finance

If you need to secure funds quickly, talk to us. We can search the market to find you the best bridging deals out there, whether it’s to support a property purchase or finance a refurbishment.

Get in touch

To talk through your options for bridging loans with no obligation, please get in touch.