How to use a bridging loan to buy a house in London?

How to use a bridging loan to buy a house in London
What's on this page?
    Add a header to begin generating the table of contents

    The London property market is very competitive, which can mean you might lose out on your dream home if you do not have the finances in place quickly enough to go through with the property purchase.

    A bridging loan can be used to ‘bridge the gap’ between selling your existing property and buying a new property in London, without being dependent on receiving the finance from the sale. A bridging loan can also be a good solution for purchasing an investment property.

    A bridging loan can be an effective way to purchase a property in London due to high borrowing limits, competitive interest rates, and fast turnaround times – making it ideal for those looking to move quickly into a new home without having to wait on the traditional sale process.

    This article explains the benefits of using a bridging loan, the circumstances where a bridging loan may be most suitable and the process of finding the best bridging loan deals.

    Is it worth getting a bridging loan for London property?

    When you are considering whether to take out a bridging loan for London property, you should review the full range of finance options that are available.

    The bridging loan provides short term finance to enable you to purchase a property in circumstances when waiting for a mortgage could lead to the purchase falling through.

    For example, being stuck in a property chain could lead to your property purchase not completing. Another example of where bridging finance is ideal is when you are buying a property at auction and need to have the finances in place quickly.

    A bridging loan tends to be more suitable for when you know that you will be receiving finance from another property sale so that you can pay the loan off within the short loan repayment term.

    In areas of London where property is in high demand, having bridging finance available could be the only way to secure the property you want if you do not have a lump sum of cash. For sellers who are looking for a quick sale, having fast finance will give you an advantage over other potential buyers.

    Before you make your decision, you should compare the total costs of bridging loans across the full range of bridging finance providers, as well as comparing the costs against other types of finance. This is where our specialists at Bridging Options can help.

    What are the benefits of using bridging loans in London?

    The key benefit of using London bridging finance is that you are able to access money for a house purchase much faster than applying for a traditional mortgage with high street banks.

    Generally, bridging loans can be obtained within just a few days, so there is no long delay to your property purchase. This fast availability of finance can help to ensure that your property offer is accepted, whether it is for auction finance or making sure you don’t miss out on a property due to waiting for your own home to sell.

    Another potential benefit of taking out a bridging loan is that credit history has less importance. This is because the loan is secured against an asset, so people with adverse credit history may still be able to obtain a loan for a property where a traditional mortgage lender may have declined the mortgage application.

    Are there drawbacks to financing London property with bridging loans?

    It is important to understand how bridging loans work, as they are quite different to the mortgages you can get from traditional lenders. A bridging loan is a secure loan, where you secure the finance against another asset, which will usually be another property.

    If you do not repay the loan in the required timeframe, then you risk losing the asset that you have secured the loan against, so bridging loans are considered higher risk compared to other finance options.

    The other factor to consider when you are deciding whether to opt for a bridging loan is that the interest rates will usually be higher than that of a standard mortgage, as you are taking the loan out over a shorter period.

    To find out more about the differences between Bridging Loans vs Mortgages, please read out informative guide.

    How does bridging finance work buying a house in London?

    Applying for bridging finance in London is usually a quick process and the lending criteria is significantly different to applying for a traditional mortgage loan. There are two main types of bridging loans:

    Open bridging loan

    An open bridging loan has no fixed end date for the repayment but the lender will want to see evidence that you have an exit strategy, so that they are assured that you will be able to repay the loan. For example, they will require evidence that another property sale will provide the required amount of equity for you to repay the loan.

    Usually, open bridging loans will be expected to be repaid in less than two years and failure to do so can result in losing the asset you have secured the loan against.

    Closed bridging loan

    A closed bridging loan has a fixed repayment deadline. Closed bridging loans will usually be used when the contracts have been exchanged on a property and the buyer requires a very short term loan until their property sale is complete.

    When you are choosing the best bridging loan deals, you can use an online bridging loan calculator to help you to decide if this option is the most cost-effective way to finance your property purchase. There may be arrangement fees, valuation fees and broker fees to take into account, just like with traditional mortgages.

    Learn more about open vs closed bridging loans here.

    How long does it take to buy a house with a bridging loan in London?

    The ultimate benefit of using a bridging loan in London is that you can raise funds very quickly, usually in a matter of days. This means that the length of time it takes to buy a house with a bridging loan will be more dependent on the other parts of the property buying process.

    If you are buying from an auction site or a house with no property chain, the property purchase could be completed in less than two weeks. However, the full process of buying a house will also usually involve arranging a survey, conveyancing searches and drawing up the contracts, which will usually take longer than obtaining bridging finance.

    Get in touch with Bridging Options today

    Taking out a bridging loan can be a risk so you must be sure that it is the right option for you. As a bridging loan specialist with many years of experience, Bridging Options can provide fast finance with no exit fees.

    Contact us today and we can provide you with expert advice on the bridging loan process and help you to secure your property purchase with a fast turnaround bridging loan.

    Conclusion

    Bridging loans are an ideal solution when you require fast finance, either to buy a property at auction, to avoid being in a property chain or to ensure that you do not miss out on property in a competitive market such as London.

    However, there are some risks associated with taking out a secured loan against another asset, so you should always seek more detailed advice before you decide to apply for a bridge loan. You should also ensure that you have a clear exit strategy that will enable you to repay the loan.

    Most lenders will be able to provide you with a full breakdown of the bridging loan cost, so that you can decide whether it is a better option than taking out a standard mortgage.

    Whether you are buying a property as an investment, buying a residential property to live in or require development finance to pay for development work on a property, bridging finance could be the fastest and most hassle-free solution.

    mark piper bridging loan consultant
    Mark Piper

    I am the Senior Consultant at Bridging Options. I have extensive experience in leading successful sales teams at major UK insurers and founding a start-up mortgage brokerage, I bring expertise in residential and commercial property investments. Through strategic collaboration with industry leaders, I am committed to delivering exceptional service and empowering clients to achieve their property investment goals.

    Make an Enquiry

    Need Specialist Advice?

    Complete the form to arrange your initial free phone consultation with our bridging loan specialist:

    This field is for validation purposes and should be left unchanged.

    COMMERCIAL LOANS

    Commercial bridging loans offer a short-term funding solution for businesses, landlords, property developers and land owners in the UK.

    RESIDENTIAL LOANS

    Residential bridging loans are a popular and useful form of property finance, but at Bridging Options, we appreciate that comparing different rates and terms can be complex and confusing.

    Development Loans

    Development finance offers short-term funding to those who need help with the purchasing and/or building costs of a construction project.

    Our Latest Posts
    differences between open and closed bridging loans Bridging Loans
    What’s the Difference Between Open and Closed Bridging Loans?
    Read More
    secure commercial property in london with a bridging loan Bridging Loans
    Guide to Securing Your Next Commercial Property in London with a Bridging Loan
    Read More
    pros and cons of commercial bridging loans Bridging Loans
    The Pros and Cons of Commercial Bridging Loans
    Read More

    Why choose Bridging Options?

    As a commercial property investor, we understand the importance of securing finance quickly and efficiently in time for your next property venture. That is why we created Bridging Options, to help businesses and commercial property investors secure the finance they need with ease and access the best deals on the market.

    Fast Turnaround

    Specialist Knowledge

    Fast Turnaround

    No Exit Fees