A bridging loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years pending the arrangement of larger or longer-term financing. Often borrowers look to purchase property but may not be able to sell their current property within the same time frame. That’s why bridging loans can be a helpful option.

When you take out a bridging loan, the lender usually takes on the mortgage on your existing property as well as financing the purchase of the new property. The total amount borrowed is called the “Peak Debt”, and includes all borrowed amounts as well as any stamp duty and included fees. Repayments on a bridging loan will generally be calculated as interest only and in many instances this interest may be capitalised until the original property is sold. This means that the interest is accrued and added to the peak debt.

Once you sell your original property, the net proceeds of the sale are then used to reduce the Peak Debt. The remaining debt is then repaid as a standard mortgage product from this point onward.

If you have any questions or would like to learn more about applying for a Bridging Loan – get in touch today!

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