Bridging Finance

What is this?

Bridging loans are short-term loans, usually for between 1 month and 1 year, that are secured on property. Bridging loans normally need to be closed, i.e there will need to be a ‘proper’ re-mortgage product in place that will repay the bridge. Open-ended bridges are rare and expensive. As bridging loans can be used for the purchase of residential properties, they can be regulated. Interest rates are high, in the order of 1-2% monthly but, as the loan is for a short period and the interest may be ‘rolled-up’ or ‘accrued’, bridging loans can be very cost-effective.

Who is it for?

Bridging loans are often used when there is insufficient time to complete on a normal mortgage, for example, when purchasing at auction. Similarly, a lender may agree a mortgage on a property but withhold (or retain) the full amount until necessary work has been done on the property. In either case, a bridging loan may provide the solution.

Who is it not for?

Bridging loans are not suitable unless there is a ‘proper’ mortgage available to repay the bridge.