What is a Bridging Loan?

A Bridging loan is an important financial product offered by several mainly specialist lenders. The product allows borrowers to access large funds quickly and oftentimes without the need for exhaustive checks.

How does a Bridging Loan work?
Usually arranged by expert mortgage brokers. There are a number of bridging loan products that can be used for residential or investment purchases. 

Because bridging loans are more flexible and quicker to arrange than standard mortgages, they tend to have higher interest rates and other fees attached to them. Although monthly interest repayments are sometimes not required, but will be added to the final settlement loan/figure. 

Bridging loans offer Short term funding typically 6-12 months and so It’s vital to establish how the loan is to be repaid from the outset. This would normally be through the sale of the subject property or through refinancing onto a long term mortgage. 

Scenarios in which Bridging Loans can be used
A bridging loan is a useful financial product and can be used in a number of scenarios. For example, a developer or property investor may utilise a bridging loan to obtain immediate funding at an auction or as a loan to bridge the gap between making a purchase and other funds becoming available. 

A bridging loan might also be used to purchase a property that is derelict and in an unmortgageable condition. The loan will act as a stop-gap, allowing the developer to improve the property so that it can be sold and a standard residential or buy to let mortgage can be obtained. 

Another common scenario might be where a chain is broken on a purchase. In this situation a short term bridging loan can be used to enable the onward purchase to be completed prior to the sale of the existing property.

Mortgages and Insurers Solutions are award-winning buy to let mortgage brokers and can help you with any queries you have about bridging loans, buy to let mortgage and more. Just us the live chat function on our website or call us on 0208 364 3444.

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