A bridging loan is a short term loan. It is normally used to cover the gap between buying a new house whilst waiting for the current house to sell. It is a very short term loan offered at a low-interest rate. In some cases at less than 1%. However, there can be large administration fees involved with proceeding with the loan. These can be arranged and sorted very quickly to ensure that the finance is in place so nothing falls through.
- With an open bridging loan, there is no fixed date that the loan repayment needs to be on. This is as these are normally used when you have purchased a new house but the current house either hasn’t sold or isn’t on the market at all.
- However, it is expected to be paid off within a year. This type of bridging loan can be much harder to get. Also even if it gets accepted much more costly.
- A closed bridging loan is when a fixed repayment date is set for the loan. This is normally used if the sale for the previous house is ready to go through and you are waiting for the completion of it. These kinds of bridging loans are much more flexible and affordable. They are also much safer and secure for the lender.