A bridging loan is a type of short-term loan that is used to bridge a temporary gap in financing. It is typically used to help someone purchase a new property before selling their existing one.
For example, if you have found a new home that you wish to purchase, but have not yet sold your current home, a bridging loan can help you finance the new purchase while you wait for your current property to sell. The loan is usually secured against the existing property, and the amount borrowed is based on the value of that property.
Bridging loans are typically offered for a period of between one and twelve months, and are usually more expensive than traditional home loans, with higher interest rates and fees. However, they can provide a useful solution for those who need to raise funds quickly, such as property investors, developers, or those who need to complete a property purchase in a short timeframe.
It is important to note that bridging loans carry risks, and should only be considered after seeking professional advice. It is also important to have a clear exit strategy for repaying the loan, such as through the sale of the existing property or through refinancing with a traditional home loan.
