Insurance News Archive

Bridging loans 'should be avoided'

Bridging loans should not be considered unless they are "absolutely unavoidable", according to a provider of legal services.

With some property owners not wanting to wait for the sale of their own home to be completed before putting the money down on their new one, some turn to temporary bridging loans, which, according to the AA legal services "should not be employed".

Product manager for AA legal services James Molloy said: "My view on bridging loans is that unless absolutely unavoidable they should not be employed. If one is obtained as a last resort, it should only be used where the period is finite, i.e. after exchange. [Bridging loans] should never be considered a routine factor in protecting a chain.

"However, as with all financial products, appropriate advice in individual circumstances is essential."

These loans can be particularly problematic in the case of broken chains, which could see homebuyers take out a loan while their means of repaying it disappearing.

29 Jan 2008