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Q: What is a bridging loan?

A bridging loan is a short-term loan of 3 to 18 months. It allows you or your business to act quickly to make any kind of financial commitment before you sell a property or secure a longer-term loan or mortgage. Bridging loans are repayable in full at the end of the term, rather than in instalments like with a traditional loan.

Q: What can I use a bridging loan for?

Bridging loans are mainly used to buy or sell property, allowing you to buy a new home or premises before selling your old one. Landlords, homeowners and property developers often use bridging finance for buying a property at auction or funding renovations. Bridging loans can also be used by businesses as working capital, for buying machinery or equipment, and paying tax bills.

Q: What are the key benefits of a bridging loan?

You can get bridging finance much quicker than a mortgage – usually in under 14 days – so you can seize opportunities at auctions for refurbishments or buy-to-let investments. You can also buy uninhabitable properties that would be ineligible for other borrowing. If you buy properties under value, you can also borrow against the value of the property, not the purchase price. Bridging loan interest rates are usually much lower than standard loans. And you’re not tied into making monthly repayments with bridging finance like you are with a traditional loan.

Q: What is the difference between a regulated and unregulated bridging loan?

Regulated bridging loans are secured against a property which is, or will soon be occupied by the borrower or a member of their family. This type of bridging finance is regulated by the FCA. Unregulated bridging loans are used for a business investment or commercial property, but these lack FCA protection.

Q: What types of bridging loans are available?

You can choose from a closed bridging loan or an open bridging loan. A closed bridging loan has no fixed repayment date, but you are usually expected to repay within a few months, usually upon the scheduled completion of a property sale or securing a mortgage. You’ll need to explain your repayment plans to your lender beforehand. Closed bridging loans often have better rates. With an open bridging loan, you don’t have to detail your repayment plans to your lender. This type of bridging finance is used when you’ll be paying back the loan with a property sale, but you don’t yet have a buyer or a completion date. You also have a longer period to settle open bridging finance – usually 12 to 18 months.

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Bridging Loan Stories

Bridging finance could change your life

From landing your dream property to securing an unmissable investment, or simply clearing your tax bills, a quick bridging loan puts you in the driving seat. Here are some ideas to help you choose the right bridging loan company.

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MFS deploys multi-million pound bridging finance in just four days

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BRIDGING FINANCE GUIDES

Learn about specialist bridging finance

They don’t teach you about bridging loans at school. So we’ve put together some guides on commercial bridging finance, development loans and even a bridging loan calculator so you can weigh up your finances before you apply.