Bridging Loan

A bridging loan, also known as a bridge loan, is a type of short-term financing that provides immediate funds to cover a temporary cash shortfall. It is typically used in real estate transactions to bridge the financial gap between purchasing a new property and selling an existing one. Bridging loans are designed to provide quick access to capital and are usually secured against the borrower's existing property.

Bridging loans can be crucial in competitive property markets where buyers need to act quickly to secure a new home before their current home is sold. These loans are generally more expensive than traditional mortgages, with higher interest rates and fees, due to their short-term nature and the risk involved. They are intended to be a temporary solution, repaid once the existing property is sold or long-term financing is arranged.

1. A homeowner using a bridging loan to purchase a new house while their current home is on the market.
2. A property developer obtaining a bridging loan to finance the purchase and renovation of a property before securing long-term financing.
3. A business using a bridging loan to cover a short-term funding gap until expected cash inflows are received.