Bridging finance allows you to buy your next property before your current one sells. It is a useful tool to understand if you can upgrade or downgrade .
You carry two loans at once – Bridging finance combines your existing mortgage and the new purchase into one facility, known as peak debt, until your current home sells.
Interest is usually capitalised – Most bridging loans allow you to defer repayments during the bridging period, with interest added to the loan balance. This keeps cash flow manageable but increases the total debt.
There is a time limit – Most lenders allow six to twelve months to sell your existing property.
The sale price matters – Lenders will estimate the likely sale price of your current home when assessing the loan. If the property sells for less than expected, it affects the end debt position.
It is not available from all lenders – Bridging finance is a specialist product and lender policies vary considerably on eligibility, terms and costs.
A mortgage broker can help you compare your options across lenders who offer bridging finance.