Types of Bridging Loan

There are two types of bridging loan, a closed end, and an open end. A closed end loan is a loan that has an agreed period. Usually between the purchase of the new home, and the completion of the exchange of contracts for your existing home.

An open ended loan is more risky, if you fail to sell your old home, you will be stuck with paying for the mortgage of your old home, plus you’re new one, plus the bridging loan. This can turn out very costly, and you may find that you may not be able to keep up with the mass of payments, causing you to sell your home for a lower price that expected to pay off the debts.

Advantages

• Speed – The loan can usually be obtained within 7 days.
• Bad credit rating – They can usually be obtained even if you have a bad credit rating, and when you pay them off, it can count towards a good credit rating and enable you to get a long term mortgage.
• 100% value – You can obtain the loan for 100% of the purchase price.
• Has the potential to save money – Although the loan its self is expensive, if the property market is hot, securing a property earlier using a bridging loan could save the buyer a lot of money in escalating house prices, as well as legal fees for mortgage drop outs etc.
• Can be arranged with minimum fuss and delay.

• High Interest – Because of the short term of this loan, the interest is high.
• Secured on your home – As with the majority of loans, if you don’t keep up payments your home is at risk.