Bridging Finance Or Bridging Loan

Bridging finance, also known as a bridging loan, is a short-term financial solution designed to bridge a gap between the purchase of a new property and the sale of an existing one.

What is bridging finance/loan?

Bridging finance, also known as a bridging loan, is a short-term financial solution designed to bridge a gap between the purchase of a new property and the sale of an existing one. It provides temporary funding to cover the period when you are in the process of selling your current property but need funds to acquire a new one. 

What’s the interest like on a bridging loan? 

Considering that bridging loans are a far more short-term financial solution unlike a mortgage, the interest rates tend to be higher. The interest rate on a standard bridging loan can start anywhere from as low as 8% per annum. Most bridging loans have a span of 12 months with most lenders offering some level of flexibility to cater your specific needs. 

How does a bridging loan affect your mortgage? 

During the period from when your bridging loan is initiated until the sale of your current home, many lenders incorporate interest-only payments on the higher debt amount. This simplifies the repayment process, allowing you to focus on making principal and interest payments solely on your existing mortgage, rather than juggling repayments for two home loans. 

If you’re applying for a new mortgage while under an existing bridging loan, your application may be affected. Outstanding debt on the loan can affect your borrowing potential as the task of juggling two loans could prove difficult.

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