Here is a useful guide to bridging loans. This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business. It's basically a very short term mortgage. Like a mortgage, it's a loan that is "secured" against property.

A bridging loan is a type of loan that is used to cover shortfalls between buying one property and selling another. A prime example of when you might need a bridging loan would be if you're ready to buy a new home but are let down on the sale of your existing one. To secure your new home, before it goes to the competition, you could use a bridging loan.

A bridging loan is a short term mortgage which is secured by your property. This is usually arranged by getting a mortgage on the new property, and taking out a second mortgage on the property being sold. This type of loan is mainly available for house sales and is usually taken out to solve a temporary cash shortfall which can happen when selling and buying different properties or to pay for renovations. It 'bridges' the gap between the purchase of a new property and the sale of an existing one.

The bridging loan allows you to borrow over a short term which you can pay back as soon as you have sold your home. Because of the short-term nature of the loan however you should expect to pay more interest and higher fees than with a long-term loan.

You can also use a bridging loan to purchase properties at auction, fund short-term commercial or residential renovations, and to safeguard a property purchase if the mortgage is delayed. A bridging loan can be extremely flexible.

In the case of buying property, a bridging loan is normally secured by getting a mortgage on the new property, and taking out a second mortgage on the property being sold.

This can be the most cost-effective way to fill the gap that can sometimes occur between buying and selling your property. Due to being only a short term loan, Bridging loans are usually sold at a higher rate than a conventional mortgage.

There are two types of bridging loan are available:

Open Bridging loan

This type of bridging loan is available when you have not yet finalised the terms on which you are selling your own home, but are going ahead with the one you are buying.

Closed Bridging loan

This type of bridging loan is available when you have agreed the terms on the home that you are buying and the one that you are selling, but there is a delay in moving.

Bridging loans are available for all types of clients, from limited companies to individuals; from those with excellent credit status to those who have found it difficult to obtain mortgages and loans, including businesses, self-employed and those with a poor credit history.

Many different types of assets can be considered as security for a bridging loan, from residential, semi-commercial and commercial properties or land. Properties can be fully or partially developed, in perfect condition or need of renovation, or be of standard or non-standard construction.

Generally, you can borrow between 25,000 and 500,000 as standard. Larger loans are possible but may take slightly longer to arrange.

Lenders will usually allow bridging loans of up to 65% of the value of the properties - less any existing mortgage. But this will depend on the lender so shop around for the best deal.

As they are more risky for the lender than the usual homeowner loans, bridging loans are more expensive and should only be used where you are fairly certain to repay them within a short period of time.

You may freely reprint this article provided the author's biography remains intact: