Here is a useful guide to bridging loans. This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business. It's basically a very short term mortgage. Like a mortgage, it's a loan that is "secured" against property. A bridging loan is a type of loan that is used to cover shortfalls between buying one property and selling another. A prime example of when you might need a bridging loan would be if you're ready to buy a new home but are let down on
sale of your existing one. To secure your new home, before it goes to competition, you could use a bridging loan.
A bridging loan is a short term mortgage which is secured by your property. This is usually arranged by getting a mortgage on new property, and taking out a second mortgage on property being sold. This type of loan is mainly available for house sales and is usually taken out to solve a temporary cash shortfall which can happen when selling and buying different properties or to pay for renovations. It 'bridges' gap between purchase of a new property and sale of an existing one.
The bridging loan allows you to borrow over a short term which you can pay back as soon as you have sold your home. Because of short-term nature of loan however you should expect to pay more interest and higher fees than with a long-term loan.
You can also use a bridging loan to purchase properties at auction, fund short-term commercial or residential renovations, and to safeguard a property purchase if mortgage is delayed. A bridging loan can be extremely flexible.
In case of buying property, a bridging loan is normally secured by getting a mortgage on new property, and taking out a second mortgage on property being sold.
