Are there different types of bridging loans?
There are different methods of arranging bridging finance and also different variations to each method depending on which lender you choose to use. Method 1 The lender takes both properties as security and you have one loan (Peak Debt) to cover both the existing debt and the new purchase. You then typically have a period of 6 – 12 months (the bridging period), in which to sell your existing property. During this bridging period, different lenders have different repayment requirements. Some lenders do not require repayments during this period. Instead, the interest on the loan is added to the total loan amount. This is called capitalising repayments. Your Peak Debt will therefore be increasing each month as the interest is added to your loan. Your monthly interest will also be calculated on your Peak Debt including the capitalized repayments. Once you sell the property, the proceeds of this sale are then put towards the overall Peak Debt leaving the client with an End Debt or Final mort
