What is bridging finance?

November 20, 2021

Bridging finance (or a bridging loan) is a type of short-term mortgage that is secured against your property. It can help you in terms of releasing equity from your property quickly before you refinance with a different lender. Bridging loans can also be used for the purpose of purchasing a new property before your current home sells, or renovating a property before you downsize, upsize, or put your current home up for sale without going through the extensive mortgage application process. There is virtually no limit to the manner in which you can use this type of financing.

Is a bridging loan right for you?

Bridging loans represent a cost-effective and mainstream financing method. They are individually negotiated, which means you can end up with a loan that is perfect for your situation. Bridging financing is a good option for those who have a temporary shortage of capital or are working against the clock. You may also decide to go down this route if you are not able to secure finance from a traditional lender for a number of different reasons. Either way, there are significant benefits, although some drawbacks, of this type of loan. It is, therefore, vital you get expert input so you can understand whether or not it is the right option for you.

The interest rates for bridging loans

Bridging loans tend to be structured so that the interest rate is a percentage of the total loan amount, and this is calculated on a monthly basis. For instance, 0.45 per cent or two per cent per month. There are three ways that interest rates can work, i.e. a serviced interest rate, rolled-up interest, or retained interest. Expert mortgage advisors can help you to understand each option so that you can make sure that the loan is right for your financial situation.

Opening and closing a bridging loan

This refers to how and when you are going to pay back your bridging loan. It is important to have a clear plan in place for paying back the bridging loan. You need to know you will have the capital by a specified date, and that this is going to be used for the purpose of paying the lender back. Usually, you have a closed bridging loan if you require the funds to tide you over until a specified date. However, an open bridging loan is for those who do not have such certainty over when they are going to have the money they need.

Getting help with any type of bridging loan you may require

If you can find a reputable company with a team of expert advisors, they could help you no matter what your aims and objectives for requiring a bridging loan. From residential bridging loans to short-term loans and even auction financing if you hope to buy a property at auction. As this type of financing is incredibly flexible, it can be suited to a wide range of situations for high net worth (HNW) individuals and property investors, so there’s sure to be an option to suit all needs.



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