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Bridging Loans

In general, people rely on the sale of an existing property to pay before buying another. The cash that comes from the sale will be used for the deposit on a new property.

However, for some people, after finding their perfect new home, the existing property does not sell in time to allow them to purchase their new property.

This is where bridging loans come in. A bridging loan can either be used to pay the deposit on an existing property (assuming your lender allows you to have two mortgages at ones), or alternatively be for a much larger amount, thereby paying off your existing mortgage and paying for the deposit on a new property.

A bridging loan, by definition, is a short-term loan that is designed to help you out until your existing property sells. Generally, the lender will expect your bridging loan to be repaid using the sale of your property within a year.

You may not have to make payments to your loan during this period but you should expect to have to pay the original balance plus any accumulated interest in one go once your property is sold.

Use of this type of loan has become increasingly popular, as the housing market has gotten stronger with more demand, putting sellers in a stronger position allowing them to put tighter deadlines on how long the process can take before completion, as they know that they could pull out and easily find another buyer.