If you’ve found the property you want to buy and need to move quickly, a common option is to use a bridging loan to buy a house. Here, we look at some other examples of how bridging loans can be used to buy property:

What is a bridging loan for house purchase?

A bridging loan for house purchase is a type of short-term finance designed to ‘bridge’ the gap between the sale of your current property and the purchase of a new one. This kind of loan can be particularly useful when you need to secure a property quickly or when you’re buying a property at auction. Bridging loans are also popular among property investors who need to renovate a property before securing a traditional mortgage.

What’s different about a bridging loan?

Unlike traditional mortgages, bridging loans are typically short-term, lasting from a few weeks to a couple of years. They are designed to provide quick access to funds and are usually interest-only, meaning you only pay the interest each month and repay the principal at the end of the loan term. Bridging loans also tend to have higher interest rates compared to regular mortgages due to their short-term nature and the risk involved for the lender.

Key differences

Types of bridging loans for house purchase

Bridging loans are a popular financing option for house purchases, particularly when there is a need to act quickly or when traditional mortgage options are not feasible. There are several types of bridging loans that cater to different situations and requirements. Here, we will discuss the main types of bridging loans for house purchases in the UK:

01 First charge bridging loans

These are the most common type of bridging loans used for house purchases. They are secured against the property being purchased and are typically used when the buyer needs to complete the purchase quickly, such as in a competitive market or when the sale of their current property is pending. First charge bridging loans are usually more expensive than second charge loans but offer more flexibility in terms of repayment.

02 Second charge bridging loans

These loans are secured against a property that the borrower already owns, typically when they need to raise additional funds for the purchase of another property. Second charge bridging loans are usually more expensive than first charge loans and require permission from the first charge lender before the loan can be taken out.

What to do before taking a bridging loan?

Before taking out a bridging loan, it is crucial to carefully consider your financial situation and the specific needs of your property purchase. Here are some essential steps to follow:

Assess your situation

Budget and risk tolerance

Research and compare options

Plan your exit strategy

By following these steps, you can ensure you are well-prepared to take out a bridging loan and successfully navigate the process of using a bridge loan to buy a house.

How much will it cost?

When considering a bridging loan, it is essential to understand the costs involved. Bridging finance can be a valuable tool for securing funds quickly, but it is crucial to factor in the fees and interest rates associated with the loan. Here are some key points to consider:

Interest rates

Interest rates for bridging loans vary depending on the lender and the specific terms of the loan. Typically, rates range from 0.4% to 1.5% per month. This translates to an annual rate of around 8% to 18%. The interest rate is usually compounded monthly, meaning the interest is added to the outstanding balance, resulting in a growing balance over time.

Fees and other costs

In addition to interest rates, bridging loans often come with various fees. These can include:

Total cost

The total cost of a bridging loan includes both the interest rate and the fees. To get a comprehensive understanding of the costs involved, it is recommended to use a bridging loan calculator or consult with a financial advisor. This will help you determine the total cost of the loan and ensure you are prepared for the financial commitment.

Apply for a bridging loan today

Securing a bridging loan for your next house purchase can be the game-changer you need for fast access to funds. Whether you’re eyeing a new property, bidding at an auction, or embarking on renovations, understanding the nuances of bridging loans is key. By assessing your financial situation and comparing your options, you’re on the right path to an informed decision that supports your property investment aspirations.

At Expert Mortgage Brokers, our mission is to guide you through the maze of bridging loans to find the perfect fit for your needs. With our expertise, we tailor solutions that align with your goals, ensuring a seamless process from start to finish. Our experienced brokers are ready to provide you with the personalised advice and support you need.

If you’re looking to make a move in the property market and require swift financial assistance, don’t hesitate to reach out. Contact Expert Mortgage Brokers today, and let us help you unlock the potential of your property investments with the right bridging loan solution. Your successful property venture begins here.