Open Bridging Loans
An open bridging loan is where you wish to exchange on a new property before you have exchanged on your existing property. In these circumstances you will have to fund bridging finance on both properties – the existing mortgage and the bridging loan to enable the move to take place.
As the duration of the bridging loan is unknown as it depends on your existing property being sold this is known as Open Bridging. There is a considerable risk that the bridging finance will need to remain in place for some months so Open Bridging should not be entered into lightly. Many high street lenders are reluctant to offer Open Bridging because of these risks but there are both high street and specialist lenders who will offer Open Bridging Loans.
It is vital that before entering an Open Bridging Loan that you calculate the interest costs of the worse case scenarios, such as your property taking many months to sell, and are sure that you are prepared and have the means to meet these costs from your other financial resources. It is always prudent to ensure that you have a cash buffer available to meet any interest over-run compared to a best case situation.
Despite the added risks Open Bridging can make sense in a situation where buying the new house is compelling because of location, timing or price and that even if interest rate costs escalate you are happy to meet these costs in your overall calculations.
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