Bridging Loans

Buying a house can be both exciting and stressful at the same time, on the one hand there is the anticipation of getting the keys to the home that you want, having a place to call your own, on the other hand there is the worry of arranging a mortgage, dealing with the estate agents, the vendor, arranging the removals, and generally getting prepared for the move.

As you can see, when buying a house there is plenty to worry about, the last thing any buyer wants is further stress and pressure of selling their house quickly so as to not miss out on the one they want to buy due to the vendor requiring a quick sale, or leaving the house on the market and therefore open to a higher offer or ‘gazumping’ as it is known.

If you have found the house that you want, but are unable to complete because of a lack of funds whilst waiting for your current property to sell, then a bridging loan may be of help in such a situation, providing the money needed to complete to be repaid once the sale of your property goes through.

Using a bridging loan can speed up the buying process, which can lessen the risk of the vendor pulling out of the sale through wanting a quicker sale, and also lessen the window of opportunity for another buyer to come along with a better offer and snatch the house away.

In a typical case, such a loan is only in place for a short period of time – that being the time between buying the new property and selling the old one, due to the short-term and high value nature of this loan type, the interest rates charged are relatively high when compared to other forms of loan. However this does not tell the whole story, as regular loans will be in place for a year or more, giving more time for the interest charges to accumulate, the short-term nature of a bridging loan lessens the true cost.

While a comparatively high interest rate is charged, the cost of a bridging loan is very small when taken in the context of the whole house-buying process, and the benefit of it ensuring that the person’s desired house purchase does not fall through far outweighs any of the monetary costs. The time and stress involved in having to start the search over again when getting gazumped alone is enough to justify the bridging loan for most, and that is before you take into account surveys and other fees.

In a seller’s market it is important that buyers ensure that they are a good prospect to the seller, in general people selling a house want to do so with the minimum amount of complications, and in the least amount of time. Using a bridging loan can ensure the speediest progress towards completion, and reduce the likelihood of missing out on the property you want because of the vendor wanting things to move quicker.