Bridging

5TH FEB 2020

How a bridging loan can quickly fix a broken property chain

Picture this.

You want to sell your property. You have spotted your dream home for sale, in the right catchment area for your child’s perfect first school, with an extra room for a home office, and within your price range.

The only problem is, the buyer you have lined up for your current home has just pulled out.

A property chain relies on a lot of things happening on time and plans running smoothly. Once a chain of buyers and sellers builds up, the house selling process can get slowed down and be liable to break.

Moving house is one of the most stressful events in a person’s life, and a chain breaking or falling through will make that experience far worse. This can happen after a mortgage has been agreed, when packing has already started or even when the removal firm has been booked. But for a myriad of reasons, a buyer can suddenly pull out of buying your home, plunging all your plans into chaos.

Often, you cannot complete a purchase without selling your current property. Thousands of pounds can be lost in fees such as arrangement costs, not to mention the investment of your time into the process. It’s always frustrating and upsetting when this happens, especially if it threatens the chance of buying your dream home.

Fixing the chain with bridging finance

One solution is a short-term bridging loan which can quickly fix a break in a property chain. With this loan, you can purchase your new property outright with cash, and pay the loan back with money you get from selling your existing property.

Bridging loans are the answer to a slow house buying chain.

A bridging loan lets you take control of the situation. The home of your dreams can still be yours, even if the worst does happen. It takes worries about cashflow away, with no pressure of monthly repayments because you simply pay back the loan, plus the pre-agreed rate of interest, at the end of the term.

Another advantage to using a bridging loan for a property purchase is to remove the ‘waiting game’ element of the property chain. If you spot a property for sale which is the perfect fit for you and your family, you can quickly purchase without waiting to sell your own property. For your seller, a cash buyer is attractive and more secure, and you can often negotiate a price reduction when buying property with cash.

The purchase is now faster, more secure and stable.

How Market Harborough Building Society can help

We specialise in providing mortgages to customers with complex circumstances, including expats and older borrowers. We have a wealth of experience in arranging bridging loans that are regulated by the Financial Conduct Authority (FCA) – meaning you have extra peace of mind.

We take care to understand your situation in detail, so we can see if bridging finance is right for you and that you’ll be able to repay it.

A bridging loan has three phases:

  • The application
  • The loan advance
  • The repayment

As Mortgage Specialists, we treat all enquiries individually and applications are manually underwritten so that you can expect a common sense, tailored service to help you achieve your property goals.

Applying for bridging finance

This is where you tell us about your situation. We’ll check your requirements, including how much you will need and how long you plan to have it for. At this point, a ‘repayment plan’ also needs to be detailed. This is how you intend to pay back the loan.

After you have applied, we’ll assess the information you have given us. We can help you with paperwork and documentation. We will clearly explain to you what the process involves and the risks. We understand that speed and reliability are key to fixing this situation.

Once you have applied, the first step is to independently value your existing property/properties to establish how much we can lend to you. If the property valuation and your personal situation are satisfactory, we will make you a mortgage offer.

The loan advance

Once your application has been processed and approved, and an offer accepted, we will be ready to send the money to your solicitor to complete your home purchase quickly.

At this point, the purchase of your dream home can continue – your solicitor can discuss exchanging contracts with the seller.

The repayment

Repayment happens when your original property is sold or on realisation of an alternative repayment plan (such as the sale of other assets). We understand that this can sometimes take longer than first anticipated, so there may be options to renew or extend your borrowing period, which we can discuss with you at the time.

Once the sale is complete, you are expected to pay back the loan, along with interest costs incurred.

Contact us early, even if you aren’t sure you need us yet

Speed is of the essence, and the earlier you can tell us about your situation, the faster we can get to work. As soon as you think you may need bridging finance to fix a broken chain, contact us. This way we can better reduce your stress and meet your timescales.

Make sure you’re aware of the risks

Bridging finance is a fast solution, but it relies on you having the means to repay the loan. Your loan is secured against your property. Sometimes the worst can happen, and lenders can end up repossessing and selling your home if you are unable to pay off the bridging loan.

Your home may be repossessed if you do not keep up repayments on your mortgage.

To find out more about our range of mortgages, contact the Mortgage Team on 01858 412610.