Top 11 Tips When Taking a Bridge Loan

A bridge loan is a form of short-term loan that enables homeowners to borrow money using the equity in their property. The loan is typically used to help finance the purchase of a new home before the old one is sold. 

Bridge loans are typically available from banks and other financial institutions, and they can be a convenient way to access the equity in your home. Bridge loans typically have a term of one year or less.

If you are considering taking out a bridge loan, there are a few things you should keep in mind. Here are the top 10 tips for taking out a bridge loan:

Determine How Much you Need to Borrow

When taking out a bridge loan, it is important to determine how much you need to borrow. The amount you borrow should be sufficient to cover the costs of the new transaction, plus any additional costs such as stamp duty and legal fees. 

You should also take into account the fact that bridge loans often have higher interest rates than traditional loans when doing your calculations.

Consider the Type of Loan

It is also important to consider the type of loan that best suits your needs. There are two main types of bridge loans: closed-ended bridge loans and open-ended bridge loans. 

Closed-ended bridge loans have a fixed term and offer a better interest rate, while open-ended bridge loans may have a higher interest rate and no set term. 

Each type of loan has its own advantages and disadvantages, so it is important to consult with a financial advisor to determine which type of loan is right for you.

Choose a Reputable Lender

It is also important to choose a reputable and experienced lender when taking out a bridge loan. There are a number of lenders offering bridge loans, so it is important to do your research before selecting one. 

You should check the lender’s reviews and ratings, as well as their experience in the industry. You can also get suggestions from friends and family members or speak to a financial advisor for their thoughts on the best lenders.

Shop Around for the Best Rates

When taking out a bridge loan, it is important to shop around for the best interest rates and terms. When comparing rates, there are several things to take into account, such as the length of the loan, the type of loan, and the lender’s fees and charges. 

It is also important to compare the terms and conditions of different lenders. Some may offer flexible repayment options, while others may charge higher fees for early repayment.

Consider the Risks Involved

Taking out a bridge loan is a risky proposition. One of the biggest risks is that you could end up being stuck with two mortgages if your old property doesn’t sell within the agreed timeframe. This could leave you struggling to meet both repayments and putting your home at risk of repossession. 

Another risk is that you could end up paying more interest than you anticipated if the value of your old property decreases or the market interest rates increase.

Get Professional Advice

If you are unsure about taking out a bridge loan, it is a good idea to get professional advice from a financial advisor. They will be able to help you assess your financial situation and advise you on the best course of action.

You should also speak to a solicitor or conveyancer to get legal advice on the implications of taking out a bridge loan.

Make Sure you have an Exit Strategy

Most importantly, borrowers should make sure that they have a solid exit strategy in place before taking out a bridge loan. An exit strategy is a plan for how the borrower will repay the loan in full. 

Without an exit strategy, borrowers may find themselves stuck with an unpaid loan when their current home fails to sell. As a result, it is essential to discuss your exit strategy with your lender before taking out a bridge loan. 

Understand the Fees Involved

You should also understand the costs involved with borrowing via a bridge loan. Bridge loans typically have an arrangement fee, which is a one-time charge levied by the lender. 

Additionally, there may be valuation fees, legal fees, and other miscellaneous charges associated with taking out a bridge loan. It is important to get a full breakdown of all the fees involved before signing the loan agreement. This can help you avoid any unexpected charges down the road.

Keep your Old Home on the Market

When you are taking out a bridge loan to buy a new home before selling your old one, it is important to keep your old home on the market. This will help you to sell it as quickly as possible and avoid having two mortgages for an extended period of time. 

To help sell your old home quickly, you can make some cosmetic improvements, such as painting or decluttering. You should also consider hiring a real estate agent to help market your home and find buyers.

Have a Contingency Plan

It is also important to have a contingency plan in place in case your old home doesn’t sell within the agreed timeframe. This could involve renting out your old home or finding another way to repay the loan if you are unable to sell your property. 

If your home doesn’t sell as planned, a contingency plan will help you to keep up with mortgage payments and maintain financial stability.

Read the Terms and Conditions Carefully

As with any loan, it is important to read the terms and conditions carefully before signing a bridge loan agreement. This can help you to avoid any unexpected charges or fees. You should also make sure that you are comfortable with the repayment terms and timeline.

If you have any questions about the loan agreement, be sure to ask your lender for clarification. Once you have read and understood the terms of the loan, you can then sign the agreement and start making repayments.


A bridge loan can be a useful tool for borrowers who need to buy a new home before selling their old one. However, it is important to understand the risks involved with taking out a bridge loan. Make sure you get professional advice and read the terms and conditions carefully before signing a loan agreement. With careful planning and consideration, a bridge loan can help you to buy your dream home without any delays.