Bridging the gap between buying a new house and selling an old one is never easy, and unless you have savings in place to cover the cost of your new property before the old one sells, you’ll likely need a bridging loan.
But what are bridging loans, how much do they cost, and who qualifies for this type of finance? In this complete guide, we’ll explain everything you need to know so that you can make a more informed decision when comparing the many options available.
A Guide To Bridging Loans
A bridging loan or bridge loan is a short-term, property secured loan that you can use to finance the gap between selling one thing and buying another. While this type of finance is a popular choice for real estate transactions, you can also apply for a bridging loan to pay for:
- Tax Bills
- New Business Ventures
- Property Development
- Buy-To-Let Investments
- Divorce Settlements
- Buying Properties at Auction
How much you can borrow depends on the value of the property that you are using to secure the loan. It could be anything from £5,000 to £25 million and more. Lenders typically cap their loan-to-value (LTV) ratio at 75% of the property value, but some bridging loan providers may lend up to 80% if you have a good credit rating or you secure the loan on two or more properties.