What Is Bridging Finance And How Is It Used?

A bridging loan is a short-term loan used to help ‘bridge the gap’ between sale and purchase. They can be used when purchasing a home, to fill the gap between funding ending and new funding beginning, as well as in other similar situations. 

When using a bridging loan for the purchase of a house, often it will be used to cover the cost of buying a new home before the funds from selling your old property come through. 

This means buyers don’t have to wait until their home has sold before buying a new one, which can ease worries about sales not going through on time and losing out on the property they want as a result. 

Bridging loans are short term and are usually given on the basis that they will be repaid as soon as the funds they are acting in place of are received. They are not a suitable long-term borrowing solution and can rack up high interest if not repaid within the agreed time. 

This is usually between six months to a year, so you must be sure the means to repay are secured within this time to avoid any problems arising from missing repayments. 

Bridging loans are a good option for those in need of funding due to sudden circumstantial changes. In the case of homeowners, this could be due to the need to suddenly relocate for work or family commitments. 

They provide short-term funding for these uncertain situations to allow you to move as and when you need without waiting for your previous home to sell before doing so, so you can move quickly as per your needs. 

As with any loan option, you should only consider applying for bridging finance if you know you will have the means to repay and consider interest rates and fees as well. Failure to repay can result in repossession and you losing out on property and investment.