Bridging loans are short-term loan agreements. They can bridge the gap between buying a new property and receiving funds from the sale of an existing property.

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Why would you need a bridging loan?

If you want to move to a new house, you may be relying on the sale of an existing house to provide some or all of the funds for the new one. You may not yet have a buyer for your existing home, or even if you have, they may be held up by the need to sell their existing property. A chain of buyers and sellers can build up, slowing down the whole process. Bridging loans can be the answer to breaking a house buying chain.

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How a bridging loan could help?

An example could be a retired couple looking to downsize to a property valued at £300,000 who intend to use sale proceeds from their existing property valued at £500,000. The purchase needs to happen within 4 weeks, but they have not yet sold their existing property and so could miss out on buying their ideal retirement home.

The solution could be to arrange bridging finance of £300,000 against the existing property. Interest will accrue so no monthly repayments are required and repayment of the loan will come from the sale of the existing property.

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Not just for residential property transactions.

Although the majority of bridging loans are used to complete house purchases, there are other reasons to use them.

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• purchasing a property at auction

• landlords looking to expand their property portfolio

• capital raising

• refurbishing or converting their property 

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Bridging loans can be very useful but are more expensive than traditional mortgages, so you need the right advice.