Can someone please explain bridging loans

Bitstring , from the wonderful person Mike Mitchell said

They are (usually) a short term mortgage or second (or third) mortgage, made so you can buy a new house before you sold the old one. What they cost depends on who you get them from and how good your security is. Typically more than a mortgage but less than an overdraft/unsecured loan/etc. They are normally paid back when the property you are trying to sell finally sells, or when some other foreseen chunk of capital shows up.

The main pitfall is that you may be signing up for an open ended commitment. If you house has already sold and you just won't get the money in time to complete on the new one, no problem, you know what you are liable for. If your house has only 'nearly sold' and the buyer pulls out, you now have two houses and two large mortgages (or a mortgage and a bridging loan) for some unknown period of time. Not for people who worry a lot. 8>.

So why did you want to know - not a homework project I trust?

BT,DT,GtTS.

Probably true for a "closed" bridge. But nearer 1% per *month* for an "open" bridge.

Banks only tend to do the former.

An agent suggested it to me, as I had expressed interest in a property, but cannot proceed until I have a buyer for mine (which is worth considerably more).

MM

Bitstring , from the wonderful person Mike Mitchell said

I've done it twice .. (both open bridges). It's pretty nerve wracking, but if you really, really want the new property and you can get a decent rate out of your bank (or whoever) it may be worth it. Note that if you have other assets you can offer up tot he bank (stocks, shares, whatever) you may be able to get a better rate .. last time I was shopping I was offered something around 1.5% over base rate, iirc, which I thought was pretty good for an open ended bridging loan, although eventually my company sprang for a relocation package which cost me even less (just some tax).