Bridging Loans - No Need to Postpone the Purchase of New Home

By: Gracy Bonsu

What will you do if you suddenly come across a very good opportunity to purchase a house?
Of course, you may decide to sell your old house and go ahead with your decision to buy a new one. But, there may be an obstruction again! You would not like to miss the opportunity to buy a new house, but at the same time, if you are not able to sell your old house quickly enough there are chances that you may end up losing the race. Nobody wants to meet such a fate.

A financial solution in these types of situation is available in the market. The challenge is only to arrange money till the time your old house is disposed off. For this short period of time, there are hundreds of lenders in the UK financial market who may be willing to offer money at competitive rates. You only have to show them the agreements exchanged on the house deals to prove that there is a genuine short term need and the money would be repaid once both the deals are through.

The form of money arrangement that takes care of the time gap between selling and buying is known as bridging loan. As is self evident, this loan is only meant for a short period and once the sale money is realised, the loan has to be repaid. If the sale could not be completed within a period of 12 months, the loan term will lapse. Most of the lenders do not offer these loans for more than 12 months, but depending upon the situation a lender can extend the repayment period. The concept of financing for purchasing a home only for a short term of period may be new to you, but it has been prevalent in the market for many years.

The home movers have an advantage now as they can resort to finance for a short period of time till their home is sold. Bridging loan is a perfect solution for those who want to enter into house purchase agreement without first realising the sale proceeds of their old house.

Bridging Loans can be availed in two situations - when you have exchanged documents to sell your old house or when you are still to put your old house on sale. If the agreement to sell has been entered into and only the sale proceeds have to be realised within a short period of time then it is case of Closed Bridge. But, when you have not even put your old house for sale in the market then Open Bridge is required. In Open Bridge, the terms and conditions may be strict because there is a larger risk for the lender. You may not be able to sell your house in a long period of time.

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