Types of Bridging Finance: Open and Closed
There are a few different types of bridging finance available, and whilst they are all designed to offer short term finance, but how they are secured and repaid can vary. For more information about the types of bridging finance available, and which would be most suited to your circumstances please get in touch.
Bridging loans are used for quick and easy finance and for many different reasons. An open bridging loan is where a guaranteed repayment option or date to repay the bridging loan in a given time frame is not clear i.e. you have put your house on the market but as yet you have not received an offer so it is difficult to say exactly when your house is to be sold and the bridging loan repaid. In this way the loan is viewed more risky by the bridging loan company and as such the interest rates obtainable are normally higher.
For example: Your property is on the market for sale but as yet not sold. At the same time however your dream property has also just been put up for sale and has had lots of interest. An open bridging loan can release the equity in your house for a period of time allowing you to purchase the desired property before selling your current property and repaying the bridge.
Closed bridging finance is a popular type of loan. It is normally used to buy a new home whilst awaiting completion (after exchange of contracts) of your current residence. The sale normally has a completion date which is when the bridge is repaid in full. Very few sales fall through after exchange so lenders are happy to offer closed bridging finance.
For example: Your property has sold and exchanged contracts but completion will not be taking place until a certain date in the future. At the same time your dream property has also just been put up for sale and has had lots of interest. You don’t believe that you will complete the sale of your current property in time to purchase your dream property. A closed bridging loan can release some of the equity in your current property before it is sold allowing you to purchase your dream property. The bridging loan can then be repaid when you receive the proceeds from the sale.
Ascot Mortgages are an Independent “Whole of Market” UK Mortgage Broker. We are dedicated to providing the very best financial advice and the highest standards in customer service.
Please contact Ascot today, and you will be very glad you did.