Lately, we've been getting enquiries about bridging loans. But there is little advertising on what a bridging loan is, and how it can benefit a home buyer.
Anyone who is experienced in the property market would agree that loans can take time to approve. This can be frustrating, especially if you want to sell some property in order to make another purchase. If the process takes too long, you could lose the property you want to another buyer.
This is where bridging loans come in. Bridging loans are used to finance a new property while your current one hasn't yet sold. They can provide funding during the transition period when you may find yourself in a monetary fix.
Bridging loans are similar to traditional interest-only loans, but can only be used for a short duration. The amount you can borrow is calculated by adding the market value of your new property to what's left of your current mortgage. The likely sale price of your existing property is then subtracted from this amount.
Lenders will usually take security from both properties against one peak debt. The lender will calculate interest on your peak debt during the bridging loan term. This interest will then be added to your new loan once your existing property is sold.
If you’re unsure whether a bridging loan is right for you, get in touch with one of our leading mortgage brokers. We will look into every suitable option and explain the process to you. You may even be able to retain your current property and obtain a new loan without impacting your current one.