what is a bridging loan?

For most people when you are selling a house and using the funds from the sale to buy another, the transaction usually goes through on the same day. However if you are unable to complete the sale on the same day (or before) you will need some funds to complete the purchase of the new house.

That's where the bridging loan comes in.

They are usually short term loans to bridge the gap between your purchase and the funds coming through from the sale of your existing home.

The interest rates for Bridging Loans are usually quite high, and vary depending on whether you have finanlised the terms of your sale or not. For example a loan where terms are not finalised might be base rate + 2% with a 1% (of amount borrowed) arrangment fee, where terms are finalised the rate might be base + 1% with 0.5% (of amount borrowed) arrangement fee - this can add a significant cost to your home move.

What is a Bridging Loan?