Bridging loans ‘last resort only’

Bridging loans should only ever be used as a last resort and not viewed as a common factor in the homebuying process, it has been claimed.

Typically used to fund the financial gap between buying a new property and selling an old one, bridging loans are intended for short periods of time and charge high rates of interest.

According to James Molloy, product manager for AA Legal Services, the loans should only be used in a situation when the borrowing period is predetermined.

“[Bridging loans] should never be considered a routine factor in protecting a chain,” he added. “However, as with all financial products, appropriate advice in individual circumstances is essential.”

Following a number of reports, including research by the Times, revealing that a third of all property chains are broken, Mr Molloy explained that aborted transactions remain a “big issue”.

However, he claimed that without reform and new legislation, the market will never be free of the problem and that bridging loans are not a solution.

© Adfero Ltd

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