Bridging loans are used in special cases when people who need money for a house, car, or any other type of property need to get the loan quickly and the bank won’t approve it. So, if you don’t know what exactly happens there, keep reading to find out.
What are bridging loans?
Briefly, a bridging loan is an interim loan that enables people to borrow funds against the property they have already purchased. The estate agent will usually approach a lender once they have found a suitable buyer for your home and request a bridging loan on your behalf. If you are interested in a quick sale, it can be very handy as the money can be given within 24 hours of application. A bridging loan is an interim loan that typically needs to be repaid within 3 months. In most cases it cannot last longer than this term as the house must either be sold or the borrower’s finances need to become more stable before repayments start being made on their main mortgage. It is vital to remember that borrowing money using a bridging loan is not the same as taking out an equity release or lifetime mortgage. Also, there are many bridging loan types that can vary widely, depending on the lender. You can also consult your chosen bridging loan provider with questions and work out what would be best for you.
What are bridging loans used for?
Bridging loans can be used for various purposes, such as:
- Buying a house
- Buying a property that is under construction or being built
- Buying commercial properties/buying residential homes with the aim of renting them out.
- Buying a car.
Can anyone get bridging loans?
Yes, it is possible to get a bridging loan if you meet specific requirements. You will need to find a lender who offers the service for your particular situation. There are 2 types of properties that can be used as security for this type of loan:
- The borrower needs to have an existing mortgage or some form of unsecured finance against the property they want to buy but which is not yet in their name, i.e., they want to take out a bridging loan so that they don’t have to wait until the sale completes before borrowing money again. This means that technically there must be some form of ownership interest in the home or commercial property involved, even if only through another party such as your solicitor or estate agent acting as your agent.
- The property you want to buy or refurbish needs to be in your name (or your company’s name), but the legal process of transferring title is taking quite some time because the other party involved (the vendor/builder/ landlord) is proving difficult. The borrower may need a bridging loan to maintain their current living situation while they are waiting for the completion on another property. The release of equity from one property (your existing home) can provide funds that will allow you to move into another home immediately, without needing to wait until you sell the original one. This way, no deposit will be required and there won’t be any complications with buying a new place.
For many people, a bridging loan is a valuable financial resource to have at their disposal. It can be used for a variety of purposes, from buying a property that requires renovations or investment properties while it is not yet available, to purchasing vehicles quickly and easily. Now you know how to proceed with this, so good luck!