What is a bridging loan?
A Bridging loan is a short term, interest-only loan designed to either ‘bridge’ the gap between incoming debt and credit becoming available, or provide capital to fund a project when timing is of the essence. A bridging loan is a great solution when you need finance quickly in order to take advantage of opportunities that arise or resolve emergency situations.
Interest rates are typically high compared to other financial products, but bridge loans are often much quicker to arrange than mortgages and can often be more flexible.
Typically arranged on interest only basis, the exit strategy is usually a sale or a remortgage, and the lender will want to see evidence that your exit plans are achievable – for example:
- You’re buying property at an auction and need funds in a shorter timescale than a mortgage would allow.
- You’ve been declined a mortgage because of bad credit or declarable income – but know that these problems will be resolved in the near future.
- You are renovating a property but have been unable to secure a mortgage on it as a lender has declared it uninhabitable.
- You want to renovate a property and borrow against its increased value, but have been turned down for a secured loan.