Closed bridging loans and open bridging are the two main types of bridging finance. Open bridging is less secure for the lender and allows for a bridging loan even though one or more properties are being used as security and one has not sold.
Closed bridging finance is commonly used when buying a new home whilst awaiting completion (after exchange of contracts) of your current property. Very few sales fall through after exchange so lenders are happy to offer closed bridging finance and potentially at a reduced interest rate.
In this example of using a bridging loan, finance was taken out when a property was sold, contracts exchanged with completion taking place at an agreed date in the future. Whilst waiting, your dream property is put up for sale and gets potential buyers interested relatively quickly. You feel you will complete the sale of your current property in time to purchase your dream property, prior to it being purchased by someone else. A closed bridging loan can be secured on your current property or the new property (or both) allowing you to make the purchase on your dream property. You pay the bridging loan back when you receive the proceeds from the property sold. Use our bridging calculator now to work out your repayment.