Bridging Loans Scotland
For those of you who don’t know, a bridging loan is a specialised type of finance for short-term situations, allowing an individual to borrow from a temporary cash-flow until additional, permanent finance is available.
The temporary cash is known as the bridge, and can be best for individuals who need to make ends meet in a hurry.
The good news is that there are a variety of options available for individuals in Scotland who need a bridging loan – and we’re here to help you find the best one for your needs.
How do bridging loans in Scotland work?
Bridging loans are ideal for anyone who’s selling a property and planning on using that money to buy a new one – particularly in a difficult situation where they don’t have the collateral as early as they would like.
This short-term finance is essentially the bridge that allows you to secure the mortgage on a new property, while you wait for the sale on your current one to go through.
Like a typical mortgage, bridging finance will need to be secured against a property or assets with a typical LtV (Loan to Value) of around 70%. If you have other assets that can be used as leverage, you could get a 100% LtV bridging loan.
One of the main downsides to bridging finance is that it can often be a lot more expensive than long-term funding options, due to the simple fact that these loans are short-term solutions.
When you think about the benefits that they have to offer though, namely speed, convenience, and the opportunity to secure funds when you need them most; the chances are that you’ll find the additional interest to be worth it.
Fast facts about bridging loans
- Often, they can be arranged pretty quickly, sometimes even within days or weeks (and on rare occasions, months)
- Terms can be agreed to suit different circumstances, allowing you to obtain the best possible loan for your needs
- Since they’re secured against the property’s value, they’re not available for first-time buyers. On the plus side, they are an option for homeowners who have a less-than-ideal credit history or lower-income
The different types of bridging finance
In most cases, you’ll find that bridging loans come in two different forms – and if you’re hoping to get the best possible financing, it can be crucial to learn a little more about the differences between the two of them.
Open bridging loan
This form of loan is geared towards individuals who are looking for a property to buy but haven’t yet sold their current one.
Due to the fact that there’s not a guarantee that the sale of the property will go through, most lenders are less inclined to offer open bridging loans.
However, those who have higher equity in the property they’re looking to sell will often have a better chance of qualifying.
Closed bridging loan
This form, however, is designed exclusively for people who have already exchanged on a specific property and are simply waiting for the money they need from the transaction.
These loans are far easier to come by since it’s often far less likely for something to go wrong at this stage of the process.
The fact that there are two different options available allows for a range of individuals to be able to qualify, despite any difficulties that may have arisen during the buying/selling process of two properties.
Plus, the option for open bridging loans makes it even easier to get the funding you need, even if the situation isn’t looking too great at the moment.
In short, all of this just means that anyone who needs access to a quick loan when buying a property in Scotland can benefit from a bridging loan.
How can you get a bridging loan in Scotland?
The good news is that getting a Scottish bridging loan doesn’t have to be too much of a complex process.
In fact, you may find that it can often be fairly straightforward and have more flexible criteria than most mortgage lenders typically require.
Essentially, this opens up a range of opportunities to get the funding you need without the hassle – which is exactly what you should be looking for.
You can check out our trusted lenders or use our bridging loan calculator to take your first steps.