Mind the gap if you use a bridging loan

With house prices abroad falling by as much as 70 per cent, more UK buyers are tempted by bargain holiday home investments, turning to short-term lenders to seal a quick deal.

However, the strategy is risky – if you can’t get a mortgage, you could lose your new home and your old one.

With many Britons sensing this is the time to snap up a bargain, UK short-term lending specialist Bridging Finance Limited says it has seen a 22 per cent rise in lending for foreign property investment. Many buyers want to see off potential competitors and secure properties before arranging mortgages with traditional lenders who need more time to undertake their due diligence.

Chris Baguley, managing director of Manchester-based Bridging Finance, said: “The key to securing a good deal is acting quickly when you see a property you like and have done your research.  

“We complement the banks by providing a short-term stopgap funding while they do their long-term due diligence. The fact that there is now more competition for the same properties means that it is often down to whoever moves fastest."

A litmus test to see whether bridging finance is right is whether you have a reason more valid than wanting to buy before you can sell. It is also important to bear in mind that when taking out a bridging loan, certain lenders may want to take your current property and the new one as security, so if you default, both may be at risk.  

Source: Telegraph Online