What is a bridging loan?
A bridging loan is a short-term loan that helps you buy a new property while you wait to sell your current one. It’s a temporary solution to the financial gap between buying and selling, allowing you to move into your new home before selling your old one.
Here are some things to know about bridging loans:
How it works
You can use the equity in your existing home as security for the deposit on your new home. During the bridging period, you’ll only make interest-only repayments on the bridging loan.
How long it lasts
Bridging loans are typically for up to 12 months, some businesses allow up to 24 months.
How it’s arranged
Bridging loans can be arranged quickly, often faster than a long-term mortgage.
What happens if you don’t sell your home in time?
If you don’t sell your home within the bridging loan term, your bank may charge you extra fees or interest, use the equity in your home to fund the new loan, or sell it for you. Some bridging finance companies allow extensions of time.
What to consider
Bridging loans are generally more expensive than standard home loans, and you’ll have a higher interest rates during the bridging loan term. Although they are usually over shorter periods of time (1-2 years not 25 years like a standard consumer home loan).
This is general information only and not financial advice. Please see the advice of a professional financial adviser who knows your personal situation.