What is the typical use case for bridging finance?

Bridging finance is a type of short-term loan used to 'bridge' the gap between two transactions, most commonly in property deals. It's often used when a buyer needs to purchase a new property before selling their existing one, or when a property requires urgent renovation before it can be mortgaged.

Bridging loans typically have higher interest rates and fees compared to traditional mortgages, reflecting their short-term nature and higher risk. The loan term is usually between one month and 12 months, with the expectation that the borrower will repay the loan once they secure long-term financing or sell the property.

When considering bridging finance, it's crucial to have a clear exit strategy. This could involve securing a traditional mortgage, selling the property, or obtaining funds from another source. Borrowers should carefully assess the costs, risks, and potential benefits before committing to a bridging loan.