Many property buyers are left stuck for cash while they’re waiting for the proceeds of their property sale to come through and find themselves struggling to fund the purchase of a new home or property.

Thankfully, there’s a way around this – bridging finance. But what exactly is bridging finance, and how does it work? How are bridging loans different from regular loans? And what are the eligibility requirements?

At LTC Mortgages, we have you covered. Read on to learn more about bridging loans and bridging finance.

What is a Bridging Loan?

A bridging loan is a short-term loan that can get you from A to B until you receive a more permanent financial option. Typically, bridging loans can vary from a few days to up to three years. However, most bridging finance options are closer to six months.

Bridging loans have the name ‘bridging loan’ as they work to bridge a financial gap – getting you from A to B for a short amount of time.

In terms of bridging finance in property, bridging loans ‘bridge’ the financial gap when you’re selling your current property and buying a new property. This means that you essentially own two properties and have an amount of debt.

This is often the case if you’re struggling to sell your current property, if your home sells for less than you expected, or if the buyer has dropped out of the property sale. Bridging loans can help you acquire a new property without completing the sale of your current property.

In terms of bridging finance in property, bridging loans ‘bridge’ the financial gap when you’re selling your current property and buying a new property. This means that you essentially own two properties and have an amount of debt.

This is often the case if you’re struggling to sell your current property, if your home sells for less than you expected, or if the buyer has dropped out of the property sale. Bridging loans can help you acquire a new property without completing the sale of your current property.

Typically, bridging loans are short-term business loans. You can opt for a bridging loan if you’re waiting for a term loan to reach your account, or for a more permanent form of finance to come through – for example, the sale of a home.

How Does Bridging Finance Work?

Bridging finance is a short-term finance option – you may have also heard of bridging loan options being referred to as ‘gap financing’, ‘interim financing’, or ‘swing loans’.

It’s a form of commercial finance that allows you to access funds on a short-term and temporary basis until a long-term, more stable form of finance comes through.

If you meet the eligibility criteria and you have a set exit strategy in place (e.g a long-term loan or the sale of a property), then you should have the funds in your account in a day or two.

If you’re unsure of your bridging finance options and how much you can borrow, check out an online mortgage calculator or finance calculator.

How Are Bridging Loans Different to Regular Loans?

Regular loans can be for a variety of purposes, whereas bridging loans are typically for short-term usage only – and are often used when people are left in temporary debt due to property purchase. Term loans are often for commercial purposes.

If you compare bridging loans with term loans, you’ll notice that bridging loans hit your account much quicker than term loans. It can take several weeks for a regular/ a term loan to reach your account, but bridging loans can be in your account in as little as 24 hours.

Bridging Finance Eligibility

As with any loan, there are certain eligibility criteria that you should consider before applying for bridging finance. Although the outcome of a bridging loan doesn’t depend entirely on the state of your credit report, bridging finance lenders will run a credit check.

First of all, you’ll usually be required to provide the lender with proof of income. If you’re applying for a bridging loan for business purposes, you may be required to provide the lender with evidence of a business plan.

However, many people use bridging finance to purchase a new property while they’re waiting for the sale of their current property to go through. In this instance, you’ll usually put the property down as security. However, this depends on the terms of the loan.

Each lender will have its own terms and eligibility for bridging finance. However, most lenders require you to be over 18 years old, the loan to be over £10,000, you to have a registered address (in the UK), have an ‘exit route’ (e.g property being sold), and have a form of security.

If you need any help discussing your options when buying a property, contact one of our quality mortgage brokers today.