What is a...

Bridging Loan

A Bridging Loan is a short-term, high interest loan that helps borrowers purchase a new house, usually while waiting for their existing home to be sold.

How do I check the status of my loan?

You can find details about your credit agreements, including any Bridging Loan by checking your Credit Report. Our Multi Agency Credit Report shows you data from Equifax, Experian, TransUnion, and Crediva on a single report, ensuring you don’t miss a thing.

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How do Bridging Loans work?

If the sale of the existing house has been contracted (i.e. contracts have been signed and exchanged) then the Bridging Loan is known as a ‘closed bridging loan’. A closed Bridging Loan will have a fixed settlement date as sufficient funds to fully repay the debt are confirmed from your existing house sale. If not, it is known as an open-ended bridging loan, with no definite repayment date.

Bridging Loans can be exceptionally expensive because the interest accrued in the time between property sales can quickly add up, meaning you could have to pay back a lot more than you originally borrowed.

Generally, any Bridging Loan lender will want proof that your current property is on the market and usually will ask to see a copy of the mortgage offer for the new property. As Bridging Loans are often for substantial amounts, they also need to know that you can cover the interest payments and how you will settle the outstanding balance if the sale of your existing house falls through.

Normally a Bridging Loan will be limited to a 12-month period. For obvious reasons, Bridging Loans should be avoided as they can be financially damaging, especially if open-ended. Always take professional financial advice before considering a Bridging Loan.

How much does a Bridging Loan cost?

Bridging Loans are often subject to initial fees (between 1% and 2% of loan amount) plus higher-than-average interest rates, so they are an expensive form of borrowing – especially over a long period.

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