However, there may be a solution for buyers who want to be chain-free, which is to use bridging finance. This is a short-term funding solution – with terms of usually between one and 12 months – designed to get a deal done before you either sell the property (in this case) or refinance onto a longer-term mortgage. The idea is to bridge the gap where there is a shortfall in funding, often when you need to complete on a purchase of a new property before you have managed to sell your existing home and effectively turning you into a cash buyer. Bridging finance is arranged quickly, with lenders usually agreeing funding within a matter of days.
For example, if you have had an offer accepted on a house you wish to buy, and have a buyer lined up for your existing property only for it to fall through, arranging bridging finance against your existing home enables you to complete your purchase. It means you don’t miss out on your new home, particularly important in this market where there is a lack of stock and it may be hard to find an alternative. Bridging lenders will want to see an agreed exit plan in place before agreeing to lend to you; in this instance, your exit strategy will be to repay the bridging loan from the sale proceeds of your existing home.
Bridging finance has become increasingly mainstream as more lenders offer these products and rates have fallen. What’s more, you only pay for the duration of the loan, so if you take out a 12-month bridge but end up paying it back after say six months because you have sold your property quicker than you thought, you only pay interest for the six months you had the loan.
Bridging is a specialist area and there are a number of lenders offering these products so advice is crucial. The best way to find bridging finance is to use a whole-of-market broker such as AWS Private Finance; our team has plenty of experience in arranging bridging funding and enjoys good relationships with specialist bridging lenders to ensure you get the right product for your circumstances, on competitive terms. Get in touch for more information.