Financial transitions secured by ‘bridging loans’
Often, in the process of selling and buying Real Estate, the seller of a property may need to close on a property deal before the buyer has his own property sold. When a problem with timeliness occurs, there is no need for the new buyer to loose out on the property he wants to purchase.
According to the Council of Mortgage Lenders, bridged loans can allow an individual to buy a new house before the sale of their old one has finalized. In this way, both transactions can occur and the buyer will be prepared with the funds necessary to purchase the new property.
A spokesperson for the Council of Mortgage Lenders asserted that the name “bridged loan” is derived from the ability to bridge the gap between two secure financial transitions.
“Bridging finance is the main and obvious route where there is a mismatch between the purchase of a property and the sale of the former property,” she explained. However, she also asserted, “It shouldn’t necessarily be seen as a long-term solution to any property-related transaction.”
Secured home loans are an additional means of releasing equity in a property prior to its sale, when additional funding is needed.
In 2005, data published by PriceWaterhouseCoopers showed that 82% of all borrowing was secured, with property used as collateral.