A bridging loan is a short-term financing option, typically lasting from a few months to two years, that provides quick access to funds, making it useful in competitive property markets. It is known for its speed and flexibility compared to traditional mortgages but comes with higher interest rates due to its short-term nature and higher risk for lenders. Borrowers can choose to pay interest monthly (serviced) or have it added to the loan and paid at the end (rolled up). These loans are secured against property, with lenders often requiring a first or second charge as security.

A clear exit strategy, such as selling an existing property or refinancing with a mortgage, is essential for loan approval. Additionally, borrowers should factor in extra costs like arrangement, valuation, legal, and exit fees when considering affordability. Bridging loans serve various purposes and can be utilized in several scenarios:

• Auction Purchases:
  A bridging loan helps buyers purchase a property at an auction, where immediate payment is required. It provides quick funds to secure the property, and the loan can later be repaid through a regular mortgage, selling the purchased property, or selling another property.
• Property Development:
  Property developers may use bridging finance to acquire properties for renovation or development. They can then refinance with a longer-term loan or sell the property upon completion to repay the bridging loan.
• Property Purchase:
  One of the primary uses of a bridging loan is to facilitate the purchase of a new property before the sale of an existing one. This is particularly helpful when there is a timing gap between buying a new property and selling the current one.
• Quick Access to Funds:
  In some urgent situations, individuals or businesses might require immediate access to funds for various purposes such as business investments, tax liabilities, or legal settlements. Bridging loans can offer a quick financial solution.
• Property Refurbishment:
  Homeowners looking to refurbish their property for selling purposes or to add value before applying for a traditional mortgage might use bridging finance to cover the costs of renovations.