Residential Bridging Loans: The Essential Guide

Want to know if a residential bridging loan could be right for you?

In this quick guide we’ll cover what residential bridging loans are, when and why you might need one, and what risks are involved.

What is a Residential Bridging Loan?

Residential bridging loans are short term loans designed to bridge a financial gap. They provide funds when you need to act quickly to secure a purchase. And they’re intended to be paid back soon after, often within a year.

Bridging loans can be open – when there is no set date for the loan to be paid back – or closed, with is an end date for the loan. But with either you’ll need a clear exit strategy to confirm how you’ll pay it off. And often this comes from the sale of a property or by taking on a mortgage.

When would I need a Bridging Loan?

For residential properties, a bridging loan is often used to buy properties at auction. Where a deposit is needed immediately and full payment shortly after. A bridging loan can be arranged quickly to make the payments before a mortgage is then secured and the loan is paid back.

Bridging loans can also be used to complete a purchase if the current property hasn’t sold. The funds from the sale then pay back the loan once it all goes through. This can be beneficial for property developers or homeowners in a long chain.

How much can I borrow?

Bridging loans are intended to be used for large sums of money, often lenders have minimum rather than maximum values. Instead, an LTV of 70-75% will apply so you’ll need the funds for a deposit too.

Interest rates on these loans are generally much higher than a mortgage because of their speed and flexibility. And they’ll vary dependent on the type of property you’re buying and your financial circumstances. The interest as well as any arrangement and exit fees will need to be considered as part of the total loan amount.

How can Mortgagemove help?

A residential bridging loan is a specialist financial product so expert advice is important. Borrowing against your property comes with its risks. And sometimes a remortgage or personal loan may be more suitable.

At Mortgagemove we can help you to determine if a residential bridging loan is right for you. Some lenders only work through brokers, so you’ll often get a better choice of rates too. And if your exit strategy is through a mortgage then we can then help to arrange this at the same time.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

Some bridging loans are not regulated by the Financial Conduct Authority.

Want to know more? Then simply give our team a call on our freephone mortgage advice line on 0333 005 0333, or please text ADVICE to 82228.

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