The joy of finding your perfect home can quickly turn to disappointment if the chain of buyers and sellers breaks down.
This can lead to serious financial losses not to mention the emotional stress of seeing your plans fall apart.
But there’s a way to take back control and keep your homeownership dreams on track: a chain break bridging loan.
These loans access the equity in your current home, allowing you to buy your new property even if the sale of your current one hits a snag.
Read on as we explain how chain break finance could save the day.
Understanding Property Chains and Chain Breaks
What is a Property Chain?
In the UK property market, a property chain is a series of linked transactions where each sale depends on the one before it.
It’s like a line of dominoes – if one falls, the rest can too.
For example, if you’re buying a new home, you probably need to sell your current one to afford it. The person selling to you might also need to sell their property, and so on. This creates a chain of interconnected sales, each relying on the others to go through smoothly, and at the same time.
While property chains can help things move along, they also come with risks. The longer the chain, the more likely it is to break down. If any sale in the chain falls through, it can cause delays, financial losses, and a lot of stress for everyone involved.
Common Reasons for Chain Breaks
Several things can cause a chain break, including:
- Changes in circumstances: Unexpected events like job loss, illness, or relationship changes can force buyers or sellers to pull out, disrupting the whole chain.
- Survey or mortgage problems: If a survey finds serious issues with a property or someone struggles to get a mortgage, it can lead to a break in the chain.
- Gazumping: This is when a seller accepts a higher offer from someone else after already agreeing to sell to you, potentially causing the chain to collapse.
- Legal issues: Problems with boundaries, ownership, or delays in the legal process can also cause chain breaks.
Problems can also occur if unexpected delays causes one person to change course. Maybe they need to move fast for personal or work reasons. If a potential delay upsets this timeframe then they will want to take alternative action.
The Cost of a Broken Chain
A broken property chain isn’t just inconvenient; it can have a big impact on your finances and emotions.
Financial Repercussions
You could be left paying for surveys, legal fees, and other costs that are now useless.
The property market moves quickly. If your chain breaks, you might lose the property you wanted and have to start your search all over again, possibly having to then pay a higher price.
Emotional Strain
The uncertainty and disruption of a broken chain can be tough on your wellbeing. The stress of potentially losing your dream home and the financial worries can lead to anxiety and frustration.
What are Chain Break Bridging Loans?
When a property chain falls apart, a chain break bridging loan can come to the rescue. It’s a special type of short-term loan designed to help you buy your new property even if the sale of your current home is delayed or falls through.
Think of it as a financial bridge that helps you cross the gap created by a broken chain, so you don’t miss out on your dream home.
It lets you act like a cash buyer, making your offer more attractive and giving you the freedom to move forward without being held back by the chain.
How Do They Work?
When you sell and buy at the same time, you utilise your equity and move it to the new property, this would represent all or some of your deposit. If you can’t sell your home then you don’t have a deposit readily available.
Bridging finance helps because you borrow against some of the equity, and convert it to cash in the bank. This money is then used as a deposit on your new home, along with the new mortgage.
Chain break finance has a few key features:
Security
The loan is secured against a property you already own, usually your current home. A bridge lender will offer a loan against the equity in this property. If you already have a main mortgage in place then a second charge bridge loan will be needed.
Read more: Do You Need a Deposit for a Bridging Loan?
Short-term
These loans are meant to be short-term, usually lasting up to 12 months. This gives you time to sell your current home and pay back the loan.
Read more: How long can you have a bridging loan for?
Interest payments
You can choose to pay interest monthly or have it added to the loan to be paid back at the end.
Read more: How Do Bridging Loan Interest Options Work?
Repayment
You usually repay the loan in full when you sell your current home. The money from the sale is used to clear the loan, including any interest.
Chain break bridging loans are a practical way to deal with the problems of a broken property chain. They give you the financial flexibility and peace of mind you need to secure your dream home, even when unexpected things happen in the property market.
Read more: How Do You Repay a Short Term Bridging Loan?
Let’s talk bridging loans!
Benefits of Chain Break Bridging Loans
Using a bridging loan to rescue a property chain can offer several advantages, turning a potentially stressful situation into a smooth and successful property purchase.
Secure Your Next Home
The main benefit of a bridging loan is that it helps you keep your dream home.
When a chain collapses, you risk losing the property you want. A bridging loan lets you act quickly and secure it before it goes back on the market.
Flexibility and Control
The traditional property chain can be unpredictable and full of delays. A bridging loan gives you control, allowing you to break free from the chain and buy your new home at your own pace. This means you can make decisions based on your timeline, not someone else’s.
Reduce Stress and Uncertainty
A broken chain can be emotionally draining. The uncertainty and worry can take the joy out of moving home. A bridge loan gives you security and gives you more control.
Taking Control of Your Purchase with Bridging Loans
Even if there’s no broken chain, choosing to use a bridging loan can put you in the driver’s seat when buying a property. By having the cash ready, you gain a real advantage.
When you find the right property, you can make an offer right away, without waiting to sell your current home. This is great in a competitive market or when sellers want a quick sale.
Sellers often prefer buyers who have the cash ready, as it means a faster, more certain sale without reliance on a property chain. This gives you a stronger position when negotiating the price or other terms.
Basically, a bridging loan can make you a more attractive buyer, giving you more control and a smoother, faster purchase. It’s about getting your dream home on your terms, not the market’s.
That said, using a bridging loan to help you to move house will cost money, both in fees and interest payments. You have to be very sure that the advantage is worth the cost.
Regulation
Are bridging loans regulated by the FCA? Some loans are regulated and some aren’t, let’s find out why.
What is The Difference Between Open and Closed Bridging Loans?
read moreThere’s quite a few different ways that a bridge loan can be set up.
One option is whether to go for an ‘open’ loan or a ‘closed’ loan.
Closed Bridging Loans are a bit cheaper as you will already know exactly when it will be repaid. As the name suggests, open loans are more flexible.
Is a Chain Break Bridging Loan Right for You?
While chain break bridging loans are a great solution, it’s important to think carefully about your finances and the risks involved before you go ahead.
Bridging loans are short-term and cost more than regular mortgages. Make sure you can afford the monthly interest payments or the lump sum at the end. It’s also essential to have a clear plan for how you’ll repay the loan, usually by selling your current home or getting a new mortgage.
Bridging loans do come with risks. The biggest one is that the lender could take possession of the property you used as security if you can’t repay the loan. Also, remember there are extra costs like arrangement fees and legal fees, which can add to the overall cost.
How to get one
To get the best bridging loan you need to know a man/woman/person and they need to be a bridging loan broker.
Then you will get expert help and advice along with a wide range of lenders to choose from.
To get matched with a specialist broker, please call us on 0330 030 5050.
