Can you Use a Bridging Loan to Purchase a New Property?
If you have never heard of a bridging loan, then you should know that it is a short-term borrow that essentially bridges the gap financially until your house sale goes through. They are most useful if you want to buy a property at auction and require the cash immediately but have not yet sold the home you have now. You need to try and be mindful that a bridging loan will be secured on your property, so if you are not able to keep up with the repayments then your property could well be at risk.
How does a Bridging Loan Work?
A bridging loan will bridge the gap if you need to borrow some money for a very short period of time. They are most often used if you want to buy a new property, but the property you have now has not sold yet.
Should you Take out a Bridging Loan?
Bridging loans can be great, but sometimes they might not be for you. Usually, the answer will depend on your financial situation and your personal circumstances. A bridging loan may be a good option for you if you want a short-term loan for a large sum of money, as it means you can pay it back quickly. If you want to buy a new house but have yet to sell the home you have now, then you can take out a bridging loan. When your house does sell, you can then pay back the loan quickly.
There are some requirements you have to meet if you want a bridging loan. This includes:
· Being over the age of 18
· Having an asset for collateral
· Living in the UK
Usually, the valuable asset will be your property.
Pros of Bridging Loans
Some of the pros that come with a bridging loan include the fact that it’s a very quick process. You will be able to get the money you need very soon, and most of the time you’ll be accepted if you meet the above criteria.
Cons of Bridging Loans
Some of the cons of a bridging loan include higher interest rates and extra fees.
So, bridging loans can be good, but ultimately, it depends on your personal situation. It’s best to talk with a mortgage advisor if you aren’t sure about getting one for your next home purchase.
