Bridge Loans For Homes
Bridge loans for homes (also known as bridging loans or bridging finance) are a type of short-term finance that can be used to buy a property when other types of borrowing are not available.
You can usually take out a bridge loan for up to 12 months, although longer term borrowing may be available in some cases. You will normally have to specify an exit strategy when taking out a bridging loan, explaining exactly how you will repay the loan.
In the case of a house purchase, this will normally mean replacing the bridging finance with a mortgage or selling another property you own and using the proceeds to repay the bridge.
When to use a bridge loan to buy a home
Bridge loans are commonly used for property purchases in the following circumstances:
- Buying a new home before selling your current one
- Buying at auction (where you have a limited time to complete the purchase)
- Buying a property to renovate (which most lenders would consider unmortgageable)
Bridging loans can usually be arranged much faster than a mortgage, often within a matter of days, making them ideal where speed is of the essence.
How much does a bridging loan cost?
There are various costs associated with bridging finance. You will commonly have to pay:
- An arrangement fee (when you first take out the loan)
- An exit fee (when you repay the loan – although not all lenders charge these)
- Monthly interest (you may have the option to roll this up and repay it all in one go at the end along with the capital, or borrow extra capital to cover the interest)
Interest rates on bridge loans tend to be relatively high compared to mortgages, so make sure you shop around for the best possible deal – using a bridging loan broker is strongly recommended.
Find the best rates on bridge loans for homes
When taking out a bridging loan, it is important to get the best deal you possibly can to keep your borrowing costs as low as possible. Our bridging loan calculator offers a fast, simple way to find the money you need at an affordable rate, allowing you to move forward with buying your new home.