A short-term, secured loan, a bridging loan is literally used to “bridge” a period of time between needing money and being able to repay via an exit strategy and can be used for several reasons:
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If you are close on completing a purchase and the chain falls apart this may allow funds to be put in place to ensure the process continues - the loan is then paid back when your property is sold.
If you're unable to raise more funds from your current lender to carry out work on the property due to the current LTV, a bridging loan may facilitate this work with a remortgage after works completion then allowing the increased value to be realised to repay the bridging loan.
Timelines are naturally compressed when purchasing at auction and the speed of a bridging loan may unlock an opportunity that will otherwise be lost.
With an open bridge there is no set repayment date whereas with a closed bridge there is a set date (normally based on a planned property sale date).
Considerations - The costs of a bridging loan will be more than a traditional mortgage so a full assessment of both the reasons for requiring a bridging loan along with exit strategy will be conducted initially.