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Bridge loans

Get closer to your new home with a bridging loan in partnership with Fluent

  • Direct access to experienced advisers
  • Covers niche and specialist properties
  • Competitive, flexible funding tailored to you
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What is a bridge loan?

If you’re looking to buy a new house but haven’t sold yours yet, a bridging loan could help fill in the gap.

A bridging loan is usually short-term borrowing used as a way to bridge a gap in funding until your house sale – or other transaction – goes through. Bridging loans can be used if you buy a property at auction and you need the cash immediately but haven’t yet sold your current home.

Be mindful that like other types of secured loan, a bridging loan will be secured on your property meaning if you struggle to keep up with repayments you home could be at risk.

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We’ve partnered with Fluent Money to help you find the right bridging loan

How do bridge loans work?

Bridge loans help to 'bridge the gap' when you need to borrow money for a short amount of time. They're most commonly used when you want to buy a new home, but your current home hasn't sold yet. Here’s how a typical bridging loan might work:

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    You're eyeing up a new house priced at £350,000

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    You need £100,000 to put down as a deposit. The rest will be borrowed through a mortgage

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    You have £25,000 in savings so you’ll need £75,000 more for the deposit

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    You're waiting for your current home to sell, valued at £250,000

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    You choose to take out a bridging loan for £75,000 to 'bridge the gap' for the deposit

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    You repay the loan – and interest -  when you sell your current house

With a closed bridging loan, there is a fixed repayment date. But with an open bridging loan you’ll have no fixed repayment date, although you'll typically be expected to pay off the loan within one year.

 

What can I use a bridge loan for?

Bridging loans are used for a variety of reasons to help bridge the gap when you don’t have the immediate funds available, including:

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Buying property at auction

You may need to borrow money quickly to secure a house at auction when a mortgage will take too long to come through

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Renovation

Bridging loans are often used to cover renovation costs until it’s possible to remortgage to release equity for the project

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Purchasing land

If you’re building your own home a bridging loan could help cover the cost of buying the land and the building work, while you apply for a mortgage

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Is a bridging loan right for me?

Whether a bridging loan is the right choice for you will depend on your personal, financial situation and what you’re looking for when it comes to borrowing.

A bridging loan may suit you if you’re looking for a short-term loan for a large sum of money that you’ll be able to pay back quickly. An example of this would be if you were trying to buy a new property before you’d sold your current home - and would then be able to pay back the loan quickly once your house sale went through. 

To be eligible for a bridging loan, you’ll need to meet the following criteria: 

  • You must be aged 18 or over

  • Have a valuable asset to use as collateral (usually your home)

  • Live in the UK

Before you take on a bridging loan you should be confident you’ll have the funds available to pay it back. Bridging loans are secured on your property. If you struggle to keep up with your repayments your home could be at risk. 

Pros and cons of bridging loans

There are several factors to weigh up when deciding if a bridging loan is the right choice for you. Here are some potential advantages and disadvantages to consider:

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    Quick process

    Unlike a conventional loan or mortgage which may take several weeks to be approved, a bridging loan could be paid out in a matter of days (subject to the lender’s criteria)

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    Higher costs

    As bridging loans are short-term, they can come with higher interest rates than other types of loan with interest typically calculated monthly rather than annually

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    Borrow larger sums

    Bridging loans are secured against your property (or other valuable asset) so you should be able to borrow larger amounts than other types of loan

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    Extra fees

    There can often be several additonal fees to pay, such as exit fees, arrangement fees and legal fees. Make sure you know exactly what you’ll need to pay beforehand

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    Flexible borrowing

    The range of  loans available offers choice and flexibility - fixed or variable interest, an open-ended or closed loan term. Some bridging loans won't charge exit fees if you want to repay early

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    Property at risk

    As a bridging loan is secured against your property, your home will be at risk if you can’t keep up with repayments

Types of bridging loans

There are a different types of bridging loan available including:

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    First charge and second charge

    When you take out a bridging loan, a ‘charge’ is placed on your property - this is a legal agreement that lists the order in which lenders will be repaid if you're unable to repay your loans. If you have an existing mortgage, the bridge loan becomes a second charge, for example

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    Fixed or variable interest

    Bridging loan interest rates can be either fixed or variable. With a fixed rate you’ll know exactly how much you’ll be charged and monthly repayments will be the same. With a variable rate the interest rate can change. Fixed rates are likely to be slightly more expensive 

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    Open bridge loan

    An open bridge loan means there’s no set date for paying off the loan, but you’ll usually be expected to pay it off within a year. This type of loan may suit you if you’ve found a house you want to buy but haven’t yet sold your current home

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    Closed bridge loan

    With a closed loan you’ll have a fixed date to repay your loan. A closed bridge loan may suit you if you’re selling a property and waiting for completion to receive the money to put towards your new home. Typically you only need to borrow the money for a short time

How much do bridge loans cost?

How much your bridging loan will cost you will depend on several factors, from arrangement fees to the interest rate.

On top of the loan amount itself, you’ll also need to calculate the following: 

  • Valuation fees: To be approved for a bridging loan you’ll usually have a valuation on your property as this will be the security for the loan

  • Arrangement fees: Bridging loan costs tend to include arrangement fees, which usually amount to a percentage of the loan (typically around 2%)

  • Exit fees: Lenders will often charge a fee when the loan comes to an end - this is often to cover  admin costs, for example to remove their name from the title deeds on your property - effectively removing their 'charge' on the asset

Compare bridging loans with MoneySuperMarket and our partner Fluent

See personalised deals and find the right bridging loan for you

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Tell us about yourself

We’ll need to know a bit about you. Register yourself as a homeowner to see secured loans in the results

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We’ll browse the market

We’ll show you loans you’re eligible for – if you choose a secured loan you’ll need to register your interest with our partner Fluent

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Discuss your options

Fluent will contact you to discuss your secured loan options. Once you’ve decided on a loan you can make your full application

To make sure you’re choosing the right kind of bridging loan, here’s what you should consider:

Is this a first charge loan or second charge loan?

A second charge loan applies if you already have a loan secured against a property that already has an outstanding mortgage. So for improvements such as extensions, you’d need to take out a second charge bridging loan. The distinction lets the lender know who has priority in the repayment if you can’t pay off the loan by the end of the term. If however you’re taking out a new loan secured against the property, you’d qualify for the first charge loan.

Are you paying fixed or variable rates?

You can choose a fixed or a variable rate on a bridging loan. A fixed rate gives you the security of knowing exactly how much interest you will pay on the loan, but fixed rates tend to be slightly higher than the variable rates on offer. With a variable interest rate the rate can change from month to month.

There are a number of advantages when opting for a bridging loan for high-cost transactions:

  • You’ll receive your money quickly
  • You can borrow a large amount of money
  • Flexible borrowing might apply 

The drawbacks to bridging loans include:

  • The loan is secured against your property, so you risk losing ownership if you can’t repay
  • The high interest rates that come with the loan – this is because you pay for the flexibility and swift payment
  • You’ll be charged a number of fees so it’s a costly option

 

While a bridging loan can be arranged quicker than a mortgage, it can still take anything from a few days to several weeks to complete. This is because it’s a secured loan, and if you’re using your property as collateral, a valuation is usually needed, as well as credit checks.

 

Whether you can get a bridge loan with bad credit will depend on your personal, financial situation. If you’ve struggled with credit in the past, you may still be approved for a bridging loan as you’ll be using your property (or other valuable asset) as collateral. Certain lenders may be more inclined to lend money to someone with bad credit if they’re putting up security. Just keep in mind that if you struggle to keep up with repayments, you’ll run the risk of losing your home.

As a bridge loan requires you to put down your current home or other valuable asset as collateral, you’ll need equity in your property. How much equity you’ll need for a bridging loan will depend on the provider, but our partner Fluent asks that you have at least 35% equity. 

 

Whether a bridge loan is the right choice for you will depend on your personal, financial circumstances and whether you’re willing to use your home as collateral. Like any secured loan, a bridge loan carries risk. You could lose your home if you struggle to keep up with repayments, so make sure you consider all your options before you apply.

 

Not sure if a bridging loan is the right option for you? Here’s some potential alternatives:

Second mortgage 

If a bridging loan isn’t right for you, you could consider getting a second mortgage. Second mortgages use the capital (or equity) in your home as security

Personal loan 

Personal loans are unsecured, so you’re not borrowing against your property and your home isn’t at risk. But this means there’s a limit to how much you can borrow, usually up to £25,000

Remortgage

Restructuring your existing mortgage can be a way to release funds – if you have sufficient equity built up in your home. You can switch to a new mortgage deal with your existing lender or move to a new lender, increasing your mortgage to release cash. It’s also a good chance to find a lower mortgage interest rate if possible

 

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