A bridging loan, also known as a bridge loan, is a type of short-term loan that is often used to bridge the gap between purchasing a new property and selling an existing one.
The main purpose of a bridging loan is to provide the borrower with the necessary funds to complete the purchase of a property before the sale of their existing property is completed, or before long term finance can be arranged for the new property.
Bridging loan rates vary depending on the lender and the specific terms of the loan. Generally, the interest rate on a bridging loan is higher than that of a traditional mortgage or buy to let mortgage, as the loan is considered to be higher risk due to its short-term nature. Additionally, many lenders will also charge additional fees, such as arrangement fees or exit fees, which can add to the overall cost of the loan.
When considering a bridging loan, it is important to use a bridging loan calculator to get an estimate of the total cost of the loan, including interest and any additional fees. This can help you to determine whether or not a bridging loan is the right choice for your situation and can also help you to compare the rates and fees offered by different lenders.
It's important to note that bridging loans are typically only available to borrowers who own a property and have a strong credit history. Additionally, most lenders will require that the borrower have a clear exit strategy in place, such as a refinance or the sale of their existing property, in order to qualify for a bridging loan.
Overall, a bridging loan can be a useful solution for those looking to purchase a new property before the sale of their existing one is completed. However, it is important to consider the high interest rates and additional fees associated with these types of loans, and to use a bridging loan calculator to determine the total cost of the loan before making a decision.
If you're thinking about taking out a bridging loan, it's important to ensure that you are making the best decision for your financial situation.