Probably the most common type of bridging loan is what is deemed as an “open bridging loan”. Previously lenders would have been more cautious of securing this type of loan as it does not have a guaranteed exit route however this attitude has changed in recent years and although it may be viewed slightly differently i.e. a lower LTV and a higher interest rate may be implemented, an open bridging loan in the same manner as a closed bridging loan is now often viewed.
An open bridging loan is available to someone with a less firm exit route i.e. someone who is looking to purchase a new property prior to their current property selling. The potential term of the open bridging loan could be a lot longer and less obvious than with a closed bridging loan and this makes it riskier to the lender and as such can be more expensive.
Open bridging loans are easily the most common type of bridging loan and without doubt the requirement is usually because an applicant has seen a property they want to buy before their current property is sold or in some instances even marketed. Bridging lenders are very used to this scenario however as it is normally a persons own residential property which will be used as security, the broker and lender dealing with this type of transaction must be authorised and regulated by the Financial Conduct Authority or FCA to enable them to so. Additionally, this type of bridging loan example is often required by applicants who are either retired or approaching retirement and want to downsize and who regularly prefer to purchase a new house and make it comfortably habitable before moving out and selling their existing property.