Bridging Loans

A bridging loan is a short-term loan designed to “bridge the gap” between when funds are needed and when they become available, typically for property transactions. It provides temporary financing for buying a property before selling an existing one, or for property development projects.
Bridging loans serve as a practical solution when you require short-term financing to acquire a property at an auction, especially when you need funds immediately and have not sold your current home. These loans are particularly advantageous for those looking to buy a new home while their existing property remains on the market.

There are two distinct categories of bridging loans: closed and open. A closed bridging loan is characterized by a predetermined repayment date, provided to individuals who have exchanged contracts but are still awaiting the finalization of their property sale. On the other hand, an open bridging loan lacks a set repayment date, although borrowers are generally expected to repay it within a year.

Regardless of the type of bridging loan you choose, lenders typically require proof of a viable repayment strategy. This could involve using equity from a property or securing a mortgage. Bridging loans can be essential in enabling property purchases that might otherwise be unachievable. However, it’s important to note that due to their temporary nature, they often come with considerably higher costs than standard loans.

Bridging finance, often used to fill short-term cash flow gaps or to provide funds for a temporary period, can sometimes fall outside the regulatory framework set by The Financial Conduct Authority (FCA).

Bridging Loans

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