Buying a new home is a stressful time. When delays occur with the sale of your house and you risk missing out on your dream home, you can start to feel even more pressure, however when taking out a bridging loan there are two types of loan these are called an open bridging loan and a closed bridging loan, with open bridging loans there is no date set for the repayment of the loan because of this they are usually priced at a higher interest rate as the lender has no guaranteed date for repayment, the loan is only redeemed once the sale of the property has completed the funds are then used to pay down the bridging finance.
Bridging loans can help to relieve some of the stress. They are short-term loans that help tide you over so you can secure the purchase of your dream home or you could use the finance to release capital tied up in another property that you already own bridging loans are used for both of these purposes.
When a bridging loan is left open, an exit date is not stated in the contract. Open bridging finance is better suited to property developers that plan to renovate the property or embark on a land development project.
However, it is not unheard of for people to think about taking out a bridging loan to secure your dream home before you have had an offer in for your existing property.
In such circumstances, a bridging finance facility will recommend you take out an open bridging loan in order to avoid late payment penalties.
Having said that, it should be noted that bridging loans typically have a maximum time period of 12-18 months. For development projects, some lenders will agree to a 24-month contract.
While open bridging loans offer more flexibility, they are more expensive because the lender is taking a greater risk.
Ordinarily, the loan will be repaid once the sale of your property reaches completion and the proceeds of the sale are deposited into your bank account.
Landlords and property developers can also benefit from bridging loans. If you are embarking on a development project, a bridging loan enables you to purchase the property until you are able to sell it and pay-off the bridging loan.
Bridging finance is an alternative to borrowing money from a bank because you are able to access the money much more quickly than traditional loans. Mortgage applications can take at least three months before they are accepted.
You can get bridging finance in less than three weeks the main thing to consider is, do you want an open bridging loan or a closed one and this really does depend on how you intend to pay back the loan, you should always take professional advice before deciding which is the right loan for your circumstances.
UK Bridging Loans are one of the UK’S leading bridging loan brokers and can search all of the loans on the market to source the perfect deal for your circumstances.
Contact us now to discuss your proposal and we can assure you of the very best advice and service, call us now 0800 138 6001 or use the contact form on this page to compare loans.
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