What is Bridging Finance?

A bridging loan (or 'bridge loan') can be useful if you need to borrow money for a short period. It can help to ‘bridge the gap’ if you want to buy something with funds coming from something that you have sold but have not received the cash yet. Bridging loans can also be used if you need money immediately to buy a new property with funds from a property that you have just sold but you have not received the proceeds from that transaction as yet.

 

There are two types of bridging loan: ‘closed’ and ‘open’.

 

Closed bridging loans

With a closed loan, there is a fixed repayment date. Thrifty Money normally extends this kind of loan if the borrower has exchanged contracts but are waiting for its property sale to complete.

 

Open bridging loans

With an open loan, there is no fixed repayment date, but the borrower is expected to repay the loan within one year.

 

Whichever kind of loan is taken out, Thrifty Money will want to see evidence of a clear repayment strategy, such as using equity from a property sale or taking out a mortgage. We will also want to see evidence of what the borrower is doing to sell its current asset (if relevant). The borrower should also have a back-up plan in place in case the repayment strategy fails.
 

Thrifty Money prices this form of lending on a monthly basis because people tend to take them out for a short period. 

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What to consider?

There are a number of factors to consider when deciding on whether or not bridging finance is the right option:

• How long will you need the funds for?

• How long are properties taking to sell in your area?

• How quickly can you get your existing home ready for sale?

• Are you building a new home or buying an established property?

• Will you be able to meet the repayments on your current loan and your bridging loan?