Bridging loans – your guide to bridging finance

What are bridging loans?

Bridging loans are a short term funding option typically used by property buyers to ‘bridge’ the gap  when buying a new property and waiting for a traditional mortgage to be approved or  capital to be released from the sale of their current home.

Bridging Loans are most commonly used to help fund a new house purchase while you’re waiting for your existing property to sell.  But bridging loans can also be used for a variety reasons such as major structural home improvements and renovation projects. Bridging loans are also often used to help those looking to buy at auction where you have a short timeframe to exchange contracts.

Talk to the bridging loan experts.

Call us on 0344 346 3672

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How do bridging loans work?

There are two types of bridging loan, closed and open. With a closed loan you are given a set repayment date – this type of bridging loan is traditionally used when contracts have been exchanged but you are waiting for the sale of your property to complete. With an open loan there’s no fixed repayment date but most lenders will expect the balance to be repaid in full within one year.

As with any loan, the lender will need evidence of a clear repayment strategy. This could be using equity from the sale of a property or evidence that you have a mortgage offer in place. You'll also need to provide information regarding the new property you are purchasing and the price you are planning to pay for it  - as well as proof of what you are doing to sell your current property (if relevant). As they are a stop-gap measure, bridging loans can be significantly more expensive than a ‘traditional’ loan or mortgage.

Who are bridging loans aimed at?

Bridging loans can be beneficial in a number of circumstances but are generally speaking, aimed at experienced landlords and property developers, including those purchasing at auction. They can also be used for wealthy or asset-rich borrowers looking to release short term capital quickly without the necessity for traditional mortgage underwriting. When taking out a bridging loan you could face much higher interest rates than with a traditional mortgage and, as the loans are short-term, rates are sometimes expressed as the rate per month.

How John Charcol can help

Our team of bridging loan specialists will work with you to provide a simple and fast short-term funding solution. We’ll aim to give you a decision in principle within 24 hours and in some cases, funds can be available within 5 to 7 business days.

To find out how we can help with your bridging loan, call us on 0344 346 3672 or enquire now.

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As a guide, you could potentially borrow around:

 

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Frequently asked questions

Can I get a bridging loan on any property?

In principle yes, you can get a bridging loan on virtually any property

What percentage loan to value can I apply for?

Typically you fund up 60% of the property value with bridging loans. 

Can I get bridging loan for a property I’m buying at auction?

Yes. Bridging finance is often used to help buyers to meet the 28-day payment deadline included in most auctions and to bridge the gap until they can arrange a longer-term mortgage. We can help you with both.

Is a bridging loan always expensive?

As a short-term loan, you typically pay a little more for a bridging loan than a standard mortgage, but if you know where to go, it doesn’t have to be prohibitively expensive.

Is there a set time limit?

Bridging loans can’t exceed maximum time limits (12 months for a regulated bridging loan and 18 months for a non-regulated bridging loan) but can be paid off as soon as you have alternative finance in place.

Why John Charcol?