A guide to some of the different financial options for property purchases

Thursday, 01 March 2012 05:02

Bridging finance can help you buy a new home

Bridging finance can help you buy a new home

The problems experienced by the housing market since 2008 are well documented.

First-time buyers in particular face a hard time getting a foot on the property ladder, with mortgage lenders asking for sizeable deposits before granting mortgage finance.

There are various schemes in place to help those looking to purchase their first home, however, what if you are not a first-time buyer and you are keen to upscale?

If this applies to you, there are various finance options you can explore, including bridging finance, and mortgages.

Bridging loans

Bridging loans are commonly used by those who want to buy a new home but have yet to sell their existing home.

These loans can take one of two forms – open and closed.

An open loan is available to those who find themselves in the situation outlined above.

You can secure the loan against your existing property and use it to buy the new home you are keen to secure. The loan is then repaid once you have sold your current home.

If this is something you plan to do, you must take into consideration the length of time it could take to sell your existing home. The housing market is going through a difficult time and it could take months or even years before you sell your house, meaning the final repayment figure could be much bigger than the amount you receive from the sale of your home.

Closed bridging loans are available to those who have exchanged contracts on their existing home but have yet to tie up the loose ends and receive the money. In this situation, a closed bridging loan allows you to buy the new home you want and you repay it with the proceeds of your house sale.

Bridging loans are also commonly used by property investors buying homes at auction. In such circumstances, bridging finance is used to buy the property and is then repaid once the buyer has sold it on at a profit.

The same is true of property developers. Bridging loans are often used to secure rundown or derelict properties which are then renovated and sold on.

Depending on the nature of your purchase, bridging loans could work for you. However, it is important you know all about bridging loans and their advantages and disadvantages before taking one out.


Mortgage lending may be restricted but if you are an existing homeowner, you stand a better chance of being approved for a mortgage on a second property.

The mortgage lender may request that you use your existing home as collateral and may require a deposit from you, which could run into thousands of pounds.

There are many advantages to taking out a mortgage, including the fact that the repayments will be made on a monthly basis as opposed to one lump sum as is the case with bridging loans.

Speaking to a mortgage adviser will help you learn more and help you make an informed decision either way.

You should also speak to an adviser at a bridging loan company to learn more about their loans and whether they represent your best option.

The property market is going through a turbulent time at the moment but there are some bargains to be had, so do not let a lack of finance hold you back.



Finance articles

  • Is a bridging loan right for budding entrepreneurs?

    Raising the money you need to start a business can be hard, however, there are alternatives to bank loans. Among them are bridging loans, peer-to-peer lending and borrowing money from friends and family, meaning you need to do plenty of research.

  • Important questions to ask bridging loan companies

    Before taking out a bridging loan, you must understand a number of key points. These include the rate of interest you will be charged, the length of time you have to repay the loan and whether there are any arrangement fees that apply.

  • Why bridging loans are only suitable for short-term funding

    You should only consider bridging finance if your funding needs are temporary. This is because the high rates of interest make bridging finance unsuitable as a long-term solution, so if you have long-term needs, you should look at other options.

  • Banks vs. specialist lenders – which bridging loans are best?

    Both banks and specialist bridging loan companies can provide the bridging finance you need, meaning you need to compare products from a range of providers. You need to look at factors such as interest rates and arrangement fees.

  • Can bridging loans work for those who only need small amounts?

    Some bridging loan companies will lend up to £5 million if you have sufficient equity in your home, however, what if your borrowing needs are more modest? If you need a sum of £10,000, bridging loans can still be an option.

View More Articles

Related stories

A beginner's guide to pawning

A beginner's guide to pawning

It may be worth checking out pawnbroking as an option when you need fast finance.

Valuation for secured loans – Your questions answered

Valuation for secured loans - Your questions answered

You can free up the value of your assets without having to sell them.

Cable warns Help to Buy could create house price bubble

Vince Cable has warned the Help to Buy scheme could create a house price bubble

The Business Secretary has warned that the government's Help to Buy scheme could create a house price bubble in some parts of the UK.

What are enhanced annuities?

What are enhanced annuities?

Enhanced annuities could boost your pension income by as much as 40 per cent

10 things you might not know about equity release

10 things you might not know about equity release

Equity release expert Alex Cross, Head of Product Management from McCarthy & Stone guides us through the important points to consider if you are planning equity release to help with your retirement.

Student Finances: The top five student bank accounts for 2013

Managing your money as a student helps reduce your student debts

A-level results arrived this week and thousands of students are set to start university next month. Find out what are the best student bank accounts and how to manage your money.

How to have a richer retirement

How to have a richer retirement

Award-winning personal finance journalist Rosie Murray-West has contributed a chapter on how to have a richer retirement to a new guide from retirement specialists McCarthy & Stone.

Cameron hails Help to Buy a success as 2,000 sign up

The Prime  Minister says Help to Buy is a success

The Prime Minster, David Cameron has said the Help to Buy scheme is being accessed by the "hardworking people" it is aimed at but critics warn a lack of supply may push up prices.

Newsletter sign up


In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: