Types of Bridging Loans

Bridging loans are mainly of two types: Open bridge and Closed bridge.

Open bridge: - Those buyers take an 'open' bridge who have found and want to buy their dream property, but have not put their existing home on the market. Approaching a bank is not what all will want to do as they will have to answer a lot of questions along with supporting information. If you go to the bank in such cases, the bank will also insist you to have a lot of equity in your existing property. In Open ended bridging there is a known repayment source, but no guarantee. Open bridging is open-ended and as a result comes at a higher rate of interest. An open bridge comes into action when final terms and conditions have not been agreed on the sale of your current property but still you are very determined to buy the new property.

Closed bridge:- A closed bridge, unlike the open bridge, are available only to homebuyers who have already exchanged on the sale of their existing property. Very few sales fall through after exchange, so lenders offer closed-bridge financing happily. In Closed bridging there is a repayment source available, but it is not readily available within the required time period. Closed bridge loan is given for a defined period. A closed bridging loan can be used when there is a delay in moving in despite the agreements of all terms and conditions of both sale and purchase on both the properties.

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