What Can a Bridging Loan Be Used for?

what can a bridging loan be used for?

Finding yourself in between incomes can be a difficult thing to swallow, and while you wait many a deal could fall through or you could find yourself at a temporary loss. In these types of situations, a bridging loan can be the perfect temporary solution, especially if you’re in between property transactions, looking to renovate or purchasing via an auction.

But what is the difference between a bridging loan and a traditional mortgage? Well, a bridging loan is a short-term loan designed to typically “bridge the gap” between the purchase of a new property and the sale of an existing one. These loans are characterised by their speedy approval process, making them ideal for grasping time-sensitive opportunities. They do, however, come with higher interest rates than traditional mortgages and shorter repayment periods, often ranging from a few months to a year.

On the other hand, traditional mortgages offer a more conventional long-term approach to property finance. These loans, often spanning 15 to 30 years, facilitate property purchases by spreading the cost over an extended period.

With lower interest rates compared to bridging loans, traditional mortgages provide stability through fixed or variable rate options.

What Can a Bridging Loan Be Used for?

Although they require thorough credit checks and documentation, traditional mortgages are the more popular choice for long-term homeownership and those seeking predictable, gradual equity growth.

If you’re unsure as to whether your circumstances fit the criteria for bridging loans, we’ve rounded up 5 of the most common uses for bridging loans to help your decision.

5 Common Uses for a Bridging Loan

There are a variety of different situations that can be solved with a bridging loan, and they can be used for almost any legal purpose.

A bridging loan can be used for:

1. Meeting Transaction Deadlines

Traditionally banks and lenders can take a little bit longer than we wish when approving some loan transactions, and in the world of definite deadlines this is time many of us can’t afford.

Thankfully, bridging loans can be approved within a number of days, meaning your deadlines will be met and neither you nor your business is left out of pocket as banks dot their Is and cross their Ts.

Our specialist team here at Pure Property Finance has been arranging bridging loans for our clients throughout the UK for many many years, and at times funds can be released within 48 hours from the day of enquiry… talk about speedy funds! 

2. Chain Break Finance

It can be incredibly frustrating when a property chain breaks just as the final aspects of the deals are being ironed out. This can often lead to delays in completing the transaction, causing uncertainty and frustration for buyers, sellers, and other parties in the chain.

When a property chain breaks for whatever reason, opportunities to purchase or sell properties may also be missed. Buyers may lose out on their dream home, while sellers may miss opportunities to secure a sale at favourable terms.

Thankfully, bridging loans can be used to cover your finances while you find a new buyer for your home. Meaning you can go ahead and purchase your new investment, find a tenant and relish in financial security as you await the sale of your previous endowment.

3. Property Auctions

Auctions can be a place of opportunity and spontaneity, and while this is both exciting and adventurous it can often mean that properties can be purchased without the buyer having a mortgage agreement already in place.

However, when this does happen, you don’t have to miss out on your perfect place because an auction bridging loan can cover the costs until the bank can approve your mortgage.

You will need to have a 10% deposit with you on the day of the auction and will have 28 days to come up with the rest of the money. As bridging loans can arrive within days of the initial application, they are the perfect solution.

To learn more about buying at auction, here is our complete guide, and to speak to an expert member of the auction finance team, contact us today.

4. Property Refurbishment

If your property is in need of a refurbishment, then many high street lenders may be reluctant to help out. Thankfully a bridging loan can cover these costs and be repaid upon sale.

These loans can cover various costs associated with a renovation, including materials, labour, permits, and other expenses associated with the project. This ensures that investors have the necessary funds to complete the renovation to a high standard and within the desired timeframe.

Alternatively, refurbishment finance can help. Specialist property refurbishment loans will allow you to pay for your refurbishment project, providing up to 100% of the refurbishment costs and acquisition of the property in most cases. At Pure Property Finance, we’re here to ensure that you get the perfect deal for you. Get in touch today.

What Can a Bridging Loan Be Used for?

A bridging loan would be suitable if you’re renovating your property before refinancing at a later date.

5. Landlords Looking to Expand

Building a property portfolio can be an expensive process, and many landlords are reliant upon rent when it comes to purchasing further properties.

However, to those not willing to wait, a bridging loan can help your expansion and be repaid with the extra income.

If you do find yourself slotting nicely into one of these categories, then a bridging loan is most definitely a viable option for you and/or your business.

At Pure Property Finance, our specialist bridging loan brokers can help you get the fast finance you need. With years of experience securing fast short-term bridging loans, we have developed a strong network of the UK’s quickest and most flexible lenders meaning the best possible result for you.

Contact our dedicated bridging finance team today on info@purepropertyfinance.co.uk or by requesting a call back here. 

If you’d like to learn more about how finance can help you, check out our finance and investment blog, or take a look at a few of our blogs below.

bridging financeRead more:

Deal of the Month: Quick Finance for an Auction Property Purchase
How to Finance a Start-Up Business
Why Choose an Interest Only Commercial Mortgage?


Published on 18/01/2017

Updated on 06/02/2024


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