Open Bridging Finance
Open bridging finance is a type of short-term loan where the exact date to repay the loan is not known. A common use for an open bridging loan is when you need money to complete a house purchase, but have not yet secured a buyer for your existing house. In this situation, the proceeds of the sale of your house cannot be used to complete the purchase of the new house.
How does an opening bridging loan work?
An open bridging loan is normally secured against the value of your existing house, but because there is no accurate date when the loan can be repaid, lenders see this type of loan as risky and will charge a higher rate of interest when compared to a closed bridging loan.
A closed bridging loan is one where the date of repayment is known. For example, if you have a buyer for your house but the sale has not been completed, as long as you know the completion date, then a closed loan will be preferable to an open loan.
Though there is no repayment date for an open bridging loan, it is expected that it will be paid back within 12 months.
What do I need to do?
Whatever type of bridging loan you take out, the lender will want evidence of an exit strategy, which in other words is the way that you intend to pay back the loan. For property bridging loans this can include proof of what steps you have taken to sell your existing house. Ideally there needs to be a back-up plan in case your house is not sold within a year.
Like all loans, it helps to have a good credit record to take out a bridging loan, but if the loan is secured against property that you own, your credit records does not necessarily have to be perfect, but your home will be at risk if you fail to pay back the loan.
Open bridging loans can be used by individuals or commercial borrowers, including limited companies. Property developers and buy-to-let investors can use open bridging loans for a number of reasons. Property investors often purchase houses at auctions that require a 10% deposit to secure a winning bid. A bridging loan can be used for this deposit while a longer-term commercial mortgage is being arranged. Bridging finance can also be used to refurbish property or convert a house into several apartments.
How soon will my loan be arranged?
A bridging loan can usually be arranged very quickly. A decision to offer one can be made in less than a day, and the completion of the loan can take a few days.
There are many bridging lenders and it can be difficult to choose the best one, so it’s advisable to use a specialist broker for this. At Ascot Mortgages, we are experts at matching the right bridging loan to a borrower. We have access to the best deals at the best interest rate.
Contact Ascot Mortgages today. We can find a quote for your borrowing needs in a matter of minutes.