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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.
NB Businesses can also use bridging loans secured against land and property to raise capital, to pay off tax liabilities, or to meet business obligations.
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