The hot property market is making it more commonplace for people to make an offer fast in order to secure their dream home.
Estate agents in property hot spots say they see clients placing their property on the market one day and accepting an offer above the asking price the very next day.
Also many developers are now only willing to accept offers from buyers who can exchange contracts within a month.
This is putting existing property owners in a position where they either have to sell their property first before making an offer or looking at other ways to finance the property in the short term until they have sold their property.
A bridging loan enables you to buy the new property before you have sold your existing one.
Bridging loans
Bridging loans come in two main types. The first is called the ‘closed bridging loan’ which is available to clients who have already exchanged contracts on the sale of their current property.
The second type is the ‘open bridging loan’ which is taken out by buyers who have found their new property but have yet to sell their current property. For this type of loan the bank will want to ensure you have sufficient equity in your current property to cover payment costs.
Most lenders putt a 12 month limit on bridging finance, and at the end of this period you will need to renegotiate the finance.
You should think long and hard before taking out a bridging loan as it can be a gamble because if you fail to sell your existing home in the short term you will effectively be paying two mortgages at the same time.
Most of the main lenders offer bridging loans and there are many specilised finance providers offering loans in this market, with the bridging loans market in the UK probably worth around 1bn pounds per year.
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