What happens if your property chain breaks when you’re buying a new home? Here, we look at how regulated bridging can help and answer the frequently asked questions about chain breaks.
Buying or selling a home is exciting, but hold-ups in your property chain can make things difficult if things don’t go to plan.
In this blog, we answer the most common questions about chain breaks and how bridging finance can help, so you feel confident during your home moving process.
What is a property chain, and what is a ‘chain break’?
A property chain is a sequence of linked purchase and sale transactions. For example, your purchase will depend on the seller’s completing their purchase, and so on. If one ‘link’ fails, the whole chain (including your purchase) could collapse.
There are several reasons why a chain may break, including:
- A buyer pulls out
- Mortgage approval delays
- Survey issues
- Legal hold-ups
However, a chain break doesn’t necessarily mean you have to lose out on your new home purchase.
What is regulated bridging finance?
Regulated bridging is a type of short-term loan specifically designed for homeowner transactions.
If you’re ready to move into your new home, but your sale has fallen through, a regulated bridging loan could help you complete your purchase whilst you wait for the sale or for funds to become available.
It’s ‘regulated’ as it’s overseen by the Financial Conduct Authority. This means consumer protection is built in, and lenders must follow strict rules, such as mandatory affordability checks, to protect borrowers using this type of finance.
How can regulated bridging help when a chain breaks?
During a chain break, regulated bridging is typically used in the following situations:
- You’re buying before selling – this means you can move into your dream home without waiting for your existing property to sell
- To cover temporary gaps in finances – bridging finance is much quicker to secure than a standard mortgage, so you avoid losing out on your new property due to timing delays
What are the costs and risks of regulated bridging?
Bridging loans are a type of short-term finance, so the costs involved are usually higher than you’d expect for a standard mortgage.
Typically, you can expect the following with a bridging loan:
- Higher interest rates, usually charged monthly
- Repayment terms of around six to twelve months
- Arrangement fees, valuation fees, and legal costs
You’ll also need to ensure you have a clear exit strategy (how you intend to repay the bridging finance), such as selling your property to repay the loan.
How quickly can I get a bridging loan?
The main benefit for homeowners in this situation is how quickly you can access bridging finance. With the right paperwork, a clear exit plan, and an experienced broker (like us) on hand, approval for a bridging loan can take as little as a few days or as long as a few weeks.
Your eligibility for bridging finance typically depends on:
- Owning or in the process of buying a home
- Having a realistic exit strategy
- Meeting the lender’s affordability checks
How can I avoid a chain break?
A broken property chain doesn’t always leave you back at square one. Regulated bridging can be a great way to move forward with your home purchase or sale, but it’s important to discuss your plans with a broker first.
Next Steps
We can review your mortgage plans and your regulated bridging options to help you feel confident in your next steps. We’ll also answer any questions you may have and support you at every step.
To discuss your next steps, call us on 0345 345 6788 or submit an enquiry here.
