BRIDGING FINANCE EXPLAINED

Bridging finance is a short-term loan secured on property or land, typically for 3 to 24 months. It is designed to "bridge" a gap until longer-term funding is arranged or a property is sold.

Bridging finance can be used for a range of purposes, such as:

• Buying a property quickly, for example at auction
• Buying a property that is not yet habitable or mortgageable
• Funding refurbishment or conversion work
• Buying a new home before your current one has sold

Things to consider

Bridging finance usually costs more than a standard mortgage. Interest rates are higher, and there may be arrangement, valuation, legal and exit fees. Interest is often added to the loan rather than paid monthly, so the amount you owe grows over the term.

Before you borrow, you will need a clear plan for repaying the loan at the end of the term, such as selling the property or refinancing onto a longer-term mortgage. If that plan falls through, you could face further costs, and the lender may take possession of the property.

Regulated and unregulated bridging

Bridging loans secured on a property that you or a close family member live in, or intend to live in, are regulated by the Financial Conduct Authority. Most bridging loans for investment or business purposes are not regulated by the Financial Conduct Authority.

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