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Last edited 26 Apr 2017
Bridging loan for property
A bridging loan is a short-term funding solution which can be used to ‘bridge’ a gap between money being owed and credit becoming available. Typically, bridging loans are used in property transactions and can be essential in ensuring a property purchase can be achieved.
They often only take between seven and ten working days to organise, but can incur a large administration fee and high interest charges.
Bridging loans are short-term finance options that enable a house buyer to complete a purchase before they sell their existing home through a high-rate interest loan. This type of finance option can also help home-movers if there is a gap between the sale and completion dates in a chain, for example somebody looking for a quick-sale after renovating a property or to help assist with purchasing at an auction.
There are two types of loans: closed and open. A closed bridge loan has a fixed repayment date. An open bridge loan does not have a fixed date, but is usually required to be paid off within a year. With closed bridge loans, the borrower will usually already have exchanged to sell a property and fixed the completion date.
 Predominant target market
The typical recipients of bridging finance are landlords, small-scale property developers, and individual’s purchasing at an auction where finance is required quickly. Other recipients can include wealthy borrowers who require simple lending on residential properties.
- Properties to purchase: A new property, buy-to-let purchases, auction purchases.
- Properties to build and renovate: Housing developments, self-builds, barn conversions, refurbishment projects to sell for profit.
- Properties where funds are to be raised: Un-mortgageable properties, purchasing before selling, short-term cash flow solutions.
There are a wide variety of bridging lenders which range from small, one-man bands to larger professional organisations that are regulated by the Financial Conduct Authority.
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