Buying a new house can be a stressful and daunting process, especially when you find yourself caught within a property chain. This is very common among house purchases and when one part of the chain falls through, it can cause issues which could lead to the property sale falling through all together. In these situations, bridging finance can help to safeguard your property, we will explore residential bridging finance within this blog and how you can use it to help you.
Understanding Property Chains
A property chain is when the sale of a property is linked together by multiple buyers and sellers. For example, in order to purchase your next property you may need to wait for your current property to sell, therefore if your sale falls through, this could cause issues with your new house purchase. The people you are purchasing your house from may also be in this situation, this is how a chain is created. So, if one transaction in this chain falls through, it can cause a multitude of problems.
How Bridging Finance Can Prevent Chain Collapse
Bridging finance offers a solution to “bridge” the gap between the sale of your existing property and the purchase of the new one. If you are ready to complete on your new property, but there are delays with your current home sale, a residential bridging loan could help you get the funds you need immediately so that you can complete the transaction.
Key Advantages of Bridging Finance:
Speed: Bridging loans are perfect for quick access to funds. In a situation where you needs funds quickly, a bridging loan can be the difference between securing your new home and it falling through.
Securing Your Purchase: A bridging loan allows you to move forward with your property purchase even if there are issues with the sale of your current property.
Reduces Risk: With a bridging loan in place, you wont need to rely so much on the sellers within the chain as you have your funds secured to accept delays on the purchase of your current property and move forward buying your new one.
Considerations and Costs
While residential bridging loans offer clear benefits, they come with higher costs than traditional mortgages. Interest rates tend to be higher due to the short-term nature of these loans, and additional fees such as arrangement, valuation, and exit fees should also be factored in. It’s vital to have a solid repayment strategy in place, typically relying on the sale of your current home. However, if your property doesn’t sell as quickly as anticipated, you’ll need to be prepared for the financial implications.
There are some down sides though! Residential bridging loans can come with much higher costs than a mortgage as interests rates are higher on short term lending. This is why the purchase of a house is a great time to use a bridging loan, however, if your house does take a little longer to sell, its important to consider the implications this could have.
Bridging finance offers an option to keep your property purchase on track, which can help if you find yourself stuck in the uncertainty. The speed and flexibility offered with bridging loans means you can handle complications with the chain in confidence. Whilst there are pitfalls when it comes to interest rates, it is a really valuable option when navigating the complicated housing market in 2024.
