The Benefits And Pitfalls Of Using A Bridging Loan

The Benefits And Pitfalls Of Using a​ Bridging Loan
If you​ are caught in​ a​ property chain and are unable to​ purchase the​ house of​ your dreams,​ then why not apply for a​ bridging loan .​
a​ bridging loan can help you​ to​ secure your new property before you​ have sold your old one .​
However,​ bridging loans can also be problematic if​ your circumstances change .​
If you​ want to​ know whether a​ bridging loan is​ right for you,​ then here is​ some advice on​ the​ benefits and pitfalls of​ using a​ bridging loan.
What is​ a​ bridging loan?
As you​ might have guessed,​ a​ bridging loan is​ a​ type of​ loan that ‘bridges’ the​ financial gap between selling your house and buying a​ new one .​
If you​ have found the​ house you​ want but are unable to​ get a​ mortgage for it​ because you​ are yet to​ sell your old property,​ then a​ bridging loan might be the​ answer .​
These loans are short-term and are used to​ buy a​ new house or​ raise capital prior to​ a​ house sale .​
You can usually get bridging loans for £25,​000 up to​ a​ few million,​ depending on​ your circumstances and needs .​
Loan terms usually range from one week to​ six months,​ depending on​ how long it​ will take you​ to​ get the​ money from your sold property.
Getting your new house quickly
The reason why bridging loans can be advantageous is​ that they allow you​ to​ remove the​ problem of​ housing sales chains,​ and buy the​ house you​ want straight away .​
This stops you​ from missing out on​ your dream home,​ and will then allow you​ to​ concentrate on​ selling your old property.
Costs of​ a​ bridging loan
Although bridging loans are secured in​ the​ same way as​ a​ mortgage,​ the​ interest rates are much higher .​
You are paying for the​ convenience of​ the​ loan,​ and so the​ shorter the​ term you​ can take the​ better .​
Also,​ you​ need to​ remember that you​ will have to​ pay both the​ bridging loan and your old mortgage at​ the​ same time .​
This can be a​ serious financial burden,​ and you​ need to​ think carefully before taking out one of​ these loans.
House won’t sell
Although bridging loans are good if​ your property is​ going to​ be imminently sold,​ they can become serious problems if​ you​ cannot sell your home .​
You will be left with the​ bridging loan at​ a​ high interest rate,​ as​ well as​ your mortgage .​
This could leave you​ unable to​ make repayments,​ and you​ could lose both your old and new homes .​
Make sure that you​ have plans in​ case your property does not sell for a​ while .​
Only try and take bridging loans out when you​ have firm buyers.
Who should get a​ bridging loan?
Virtually anyone who has a​ property and is​ looking for a​ new one can apply for a​ bridging loan .​
The loan is​ secured against property,​ so even people with poor credit can get hold of​ such a​ loan .​
These loans are extremely flexible and can help you​ secure a​ new home quickly,​ but you​ need to​ take into consideration the​ high interest rates and the​ possibility that you​ current house will not sell.

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