Should you apply for closed or open bridging finance?

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Open bridging finance and closed bridging finance can both be ideal solutions for different needs, but which type should you apply for?

Open bridging finance

The repayment date for an open bridging loan is not fixed, but the bridging loan will still have a defined period. If you take out a 12-month open bridging loan, it can be repaid anytime within the 12-month period.

A typical use for an open bridging loan is when you have an existing house for sale and the proceeds from the sale are needed to purchase a new home. Without a bridging loan, if you have not yet found a buyer, or your buyer has not agreed on a completion date, then you have no way of knowing when funds from the sale of the house will be available. If the seller of the new home wants to complete their sale quickly, you need access to money before your house has been sold.

An open bridging loan is the answer to this situation. It can be used to purchase the new house before your existing house has been sold. If the bridging loan is for a 12-month period, as long as you sell your existing home within 12 months, the loan can easily be repaid.

Open bridging loans are suitable for situations where you know how the loan will be repaid but only have an approximate idea of exactly when you can make the loan repayment.

Closed bridging finance

With an open bridging loan, repayment is not fixed and is made when the funds become available. For a closed bridging loan, there is a fixed repayment date. An example of when a closed bridging loan is used is when you are selling an existing home, have exchanged contracts, and know when the completion date is. If you want to move into a new home before the completion date on your existing home, a closed bridging loan is appropriate as you know the exact date on which you can repay the loan. You can use the loan to complete your new house purchase, then after your old home has been sold, you can repay the loan.

If you know exactly when funds are available to repay a bridging loan, then choose closed bridging finance loans, as their cost is lower than those of an open bridging loan.

Early repayment

Interest is charged on a bridging loan until it is repaid, but there will normally be no fees for early repayment. If you find that you can repay a closed bridging loan before the repayment date, it is a good idea to repay it early and save interest payments.

How to start your application

If you are not sure whether you want a closed or open bridging loan, talk to one of Ascot Mortgages’ bridging finance experts, who will help you make a decision.

If you want to go ahead with the loan application, then we will match your application to the most suitable bridging finance lender.

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