are looking to take out a loan or second mortgage on your property to free up
some additional money for home improvements, a new car or something luxurious.
In that case, you may be wondering which option is best for you, a second
mortgage or a home equity loan.
A second mortgage
is a loan secured against your property. The total value of mortgages against
your home is usually 80% of its value, so the lender will only lend you up to that
amount. Your house also secures a home equity loan, but it doesn’t have any
limit on how much money you can borrow.
are more popular because they offer lower interest rates and extended repayment
periods than home equity loans. Interest rates on a home equity loan can be a
lot higher than a standard mortgage deal.
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
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.