Bridging Loans

Several years ago my wife and I were in the process of selling our house. We were very sure we had found a buyer and had agreed on a price acceptable to both them and us, but they were not able to buy our house for about three months. My wife and I were fine with this because we weren't in any particular hurry to move, we were just planning to move into a bigger home outside of town, somewhere a little more rural.

Well, one weekend while we were driving around the countryside looking at houses, we found the perfect farmhouse.  It was exactly what we were searching for.  It was located not very far out of town, on a quiet road, overlooking a little lake and surrounded by tall oak trees.  Basically, it looked perfect. 

We contacted the selling agent and found out that the price was within our budget, but only just.  We told him it would take us three months before we'd be able to buy it and this caused him to pause.  It seemed as if there was a lot of interest in that small house and he couldn't justify delaying the sale for three months.  So we decided it that we had to let it go. 

Why a Bridging Loan? 

We were able to find another beautiful house so the story has a happy ending but is there anything we could have done to get that first house?  The solution, had we known it at that time, would have been to get a bridging loan.  Bridging loans are short-term loans given by commercial lenders to borrowers for a specific purpose.  They can range in time from two weeks, for a very short loan, to up to three years for commercial bridging loans.  Homebuyers who haven't yet sold their property and wish to buy a new one need these bridging loans. 

Interest Rates of Bridging Loans 

The interest rates are probably higher than for your typical mortgage but this is as a result of the added flexibility and convenience you have from the lender.  Set up fees will also be involved.  However, they might work out at considerably cheaper than some of the options like renting accommodation.  There will also be lots of conditions where the price will be well worth paying if this means you will be getting your dream home.  

It is better if you always shop around before agreeing to a bridging loan as rates and fees can vary greatly.  You don't need to get it from your mortgage provider although there may be advantages to doing this.