A bridging loan is primarily a short-term loan or a funding option. It helps ‘bridge’ the gap between a sale of an existing property or a debt coming due, mainly a property transaction and your application for a line of credit becoming available. This is a short-term solution that you can opt for during trying times. As this is no ordinary or typically a normal loan, bridging loans are more expensive due to the purpose they serve you in your darkest hour.
Bridging loans are most useful when you want to complete purchasing your new home but have not yet completed the payment transaction of your existing home. A bridging loan here pumps money into your account in the meantime so you can buy your new home even if the payment for your current home has not yet been cleared. This is a short-term access to money until you are settled on your payment for your existing home.
However, a bridging loan can also come in handy if you have just renovated your home and want to sell it immediately or even help someone buying it at an auction.
A bridging loan is targeted at anyone in need of money for a mortgage. Landlords and rookie property developers form a large chunk of this population. It is also aimed at those individuals who will be making purchases at an auction and who need a mortgage on a fast track basis.