Most bridging loans are used to move into a new property without needing to wait until an existing property is sold. At Ascot Mortgages, we can arrange a bridging loan for you.
Not a perfect world
Most people that have an existing home are reliant on its sale to fund or partly find the purchase of a new house.
If the world was perfect, then the day of completion of the purchase of a new house would coincide with the completion of the sale of an existing house. Unfortunately, this is often not the case. Even if you have a buyer for an existing home, all kinds of delays can prevent your buyer completing the deal on time.
A bridging loan can be used to fill the gap so that you can purchase your new home quickly.
How a bridging loan works
As soon as you take out a bridging loan, you will be charged interest, but unlike a mortgage you do not pay off any of the loan amount until you are ready to repay the full amount. As soon as funds are available from your existing house, the bridging loan can be repaid. Bridging loans are designed for short-term use, so the quicker it is paid back, the less it costs.
There are two main types of bridging loans – closed and open. A closed bridging loan has a fixed repayment date, while an open one doesn’t.
You may be charged arrangement fee for a bridging loan.
The main risk of a bridging loan is that it can be expensive if not repaid quickly. It is possible to obtain a bridging loan if a buyer has not been found for your existing home, but if you home fails to sell within a reasonable amount of time, then the amount of interest that is paid can be costly.
If you choose a closed bridging loan and it is not repaid at the set time, then penalty charges can be steep. Repaying a bridging loan early does not incur fees.
Your property will be used for security for the loan. If the loan is not repaid, this could mean that the property may be at risk. If you are a business that wants a bridging loan to purchase property, some lenders will consider land or other business assets as security.
As long as you are aware of the risks, and are that you can repay the loan within a short time, then a bridging loan is useful for completing the purchase of a new home.
Bridging loans can also be used to purchase property at auctions and to develop or renovate property.
Where to get a bridging loan
There are many bridging lenders and bridging finance options available. At Ascot Mortgages, we will discuss your bridging requirements and find you the best loan to enable you to quickly complete the purchase of your new home. Talk to us today for impartial advice on bridging finance.