What is a Bridging Loan?

A bridging loan (also known as a Bridge Loan) is a short term loan that helps you bridge a gap in finances, for example purchasing a house before you have sold your current one. They are also ideal if you are purchasing a property via an auction and need the money immediately, again before selling your own home.

There are two types of bridging loans, an open one and a closed one.

A closed bridging loan has a fixed date for repayment and tends to be used when you have exchanged contracts on a property but are awaiting the sale of yours to complete.

An open bridging loan has no fixed repayment date but lenders expect the repayment to be made within 1 year.

When taking out a bridging loan your home becomes security in case you default on the payments.

Bridging loans are paid off monthly and have a higher interest rate than mortgages.

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