What is a bridging loan?

A prime example of when you might need a bridging loan would be if you're poised to buy a new home but are let down on the sale of your existing one.

To secure your new home, before it goes to the competition, you could use a bridging loan.

It's basically a very short term mortgage.

Like a mortgage, it's a loan that is "secured" against property. (So if you default the lender will use the property to get their money back).

Bridging loans are more expensive than the usual mortgage in terms of the interest charged. This is because of the added work and speed involved. They also tend to be riskier for the lender.

Accordingly, bridging loans should only be used if you are very certain you will be in a position to repay them within about 6 months.

Bridging Loans are also available to those who've traditionally found it more difficult to get mortgages and loans ie the self employed or people with bad credit.

For more information, see How Bridging Loans Work