Bridging loans between propertiesBridging loans between properties https://www.ngiresidential.co.uk/wp-content/uploads/2020/03/bridging-loans-between-properties-1024x576.jpg 1024 576 NGI Residential Mortgages NGI Residential Mortgages https://www.ngiresidential.co.uk/wp-content/uploads/2020/03/bridging-loans-between-properties-1024x576.jpg
A bridging loan provides a short-term financial solution which is typically used to secure quick funding to purchase a new property.
Typical examples of when a bridging loan can be utilised are:
- Downsizing or Upscaling – When looking to downsize or upscale a bridging loan can be used so that you can purchase the new property whilst still waiting to sell your existing property. You can also use the funds for relevant moving and selling costs and future home improvements.
Therefore, the loan helps ‘bridge’ the gap in finances being able to own both properties before their current home is sold. The loan is typically secured on the property that you are wishing to sell, but the new property may also be used if needed. These types of loans are funded for a period of 12 months for regulated loans and typically up to 24 months for unregulated loans (e.g. investment properties). When the old home is sold then the loan can be repaid. The risk is ensuring you can sell within the 12 months
There are actually two types of bridging loan, closed and open. A closed loan comes with a fixed repayment date and you will normally be given this kind of loan if you have exchanged contracts but are waiting for a property sale to complete. An open loan does not have a fixed repayment date, but you will normally be expected to pay it off within one year.
Whichever type of loan you take out, the lender will usually require seeing evidence of a clear repayment strategy; such as using equity from a property or taking out a traditional mortgage.
Bridging loans can be invaluable in facilitating a property purchase that otherwise might not be possible via a standard mortgage, re-mortgage or further advance. But as you might expect with a stop-gap measure, they can be significantly more expensive.
A Bridging Loan is a short term loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any debt secured on it.
The Financial Conduct Authority does not regulate some forms of bridging finance.
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