Bridging loans - a short-term loan to cover the period between the ending of one loan and the start of another - can stop a property sale from falling through if there is a gap between receiving payment from the sale of one property and the setting up of a long-term loan (a mortgage) for the new property.

Bridging loans are also known as bridge loans, swing loans, caveat loans and gap financing, and are typically taken out for a period of about two weeks to three years. Bridging loan rates are usually rather higher than those for conventional loans because they represent more risk for the lender, although the loans can usually be arranged very quickly if required. However, very fast bridging loans can be even more expensive. There is also an arrangement fee to pay, typically around 0.5% to 2% of the amount being borrowed.

Used in the short term, quick bridging loans can be a good idea, saving you from losing the money already spent on the buying process for a home, but if a property bridging loan is used for a lengthy period this could cause the borrower serious financial problems. Indeed, many property professionals believe that they should not be used only for problems with property chains - unless you are very confident completion of the sale of your old property will go through quickly.

As mortgage applications do not always go through smoothly, and UK buyers can withdraw from a sale easily at any time, few vendors can be very confident that a sale will definitely go through.

Bridging loans are available from both banks and specialist lenders and typically they will focus more on using your home as security rather than looking at income and affordability. They will generally offer a loan loan to value (LTV) than would be possible for a mortgage.

By Ben West