Borrowers should be "cautious" of bridging loans, says expert

10 July 2008

Most lenders offering bridging loans expect to know how the loan will be paid off, an expert has warned.

Savills Private Finance`s director Melanie Bien said borrowers should bear this in mind and exercise caution when arranging a bridging loan.

Bridging loans are offered to homeowners who have been unable to sell their house before they have bought another. Some bridging products are also open to buyers who plan to buy a property at a discounted price with a view to making a profit in the long-term.

However, Ms Bien said bridging loan companies will want to see an indication of a future return.

"[Bridging loan lenders] do want something at the end of it – some idea of where the mortgage is going to come from. Borrowers should be very cautious," she said.

Last week lender Tiuta launched their 100 per cent bridging loan, Underbridge. The product is aimed at properties that have been undervalued compared to their open market value by up to 40 per cent.

Commenting on the new product, Ms Bien said: "It`s for buying a property that would need a bit of work to bring it up to full value."

Savills Private Finance is the specialist services division of property consultancy firm Savills.

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