Bridging Loans

Pros & Cons of Bridging Loan

Pros

  • You can buy your new property right away
  • It gives you time to get a better price on your property
  • Banks charge standard interest rates
  • You can make unlimited P&I repayments
  • Avoid the costs of renting and moving twice

Cons

  • Interest is compounded monthly
  • You need to pay for two valuations
  • Higher interest rate if you don’t sell the property in time
  • No redraw facility

Bridging FAQs

Can I get a bridging loan to cover construction costs?

There are a few lenders that offer this type of bridging loan finance so please complete our form to find out if you can get approved.

How much does a bridging loan cost?

It depends on a few factors such as Capitalised interest, Property valuation, purchasing cost, selling costs, etc.

Do you need a deposit for a bridging loan?

Bridging finance isn’t covered by Lenders Mortgage Insurance (LMI), a one-off premium charged when borrowing more than 80% of the value of a property. That means you need around at least 20% of the peak debt as a deposit in order to buy the new property.

What are Closed bridging loans?

This is where you agree on a date that the sale of your existing property will be settled and you can pay out the principle of the bridging loan.

This type of bridging loan is only available to homebuyers who have already exchanged on the sale of their existing property. Sales rarely fall through after the exchange so lenders tend to see them as less risky.

What are Open bridging loans?

This is for people who have found their perfect property but don’t have an exact date to exit the bridging finance because they haven’t put their existing home on the market yet.