Can Bridging Finance Work For Me And My Property Chain?

In the current economic climate, you must be breathing a huge sigh of relief if you have managed to find a buyer for your property and are finally moving into the home of your dreams. However, due to stricter mortgage terms and credit checks, all it takes is one unsuccessful mortgage application, and the whole chain collapses.

This means that you cannot afford to move into your new house and the residents of your new house cannot move into their new house, leaving everyone back where they started, often incurring financial penalties along the way.

In this situation it is important to find out why. If it is a financial issue, you could consider lowering your asking price and possibly asking the person you are buying from to lower theirs too. As you can imagine, it is rare this goes through but it is certainly worth asking, as the financial and psychological burden may cost more than the loss in buying price.

In the current market especially, gazundering has again reared its ugly head. You can build up a great relationship with your buyer, and then at the last minute they may offer you a reduced sum as they know you are likely to be desperate to make the sale. It is important that you don't accept an offer which is unreasonable, and although it is disheartening, you may have to look at other options or relist your property.

As the property market remains imperfect, financial firms have started offering bridging loans which allow a potential buyer to borrow the money and keep the chain intact. They are often over a short period of time, anywhere between a month and a year, and loan the money until you can sell your home.

Due to the nature of these businesses, they can offer a tailored service to each individual, and if you own a lot of assets, you can often get very competitive interest rates. There are often two types of bridging loan for home buyers; open and closed. Closed bridging is in cases where the contracts have been exchanged and is likely to go ahead. In these scenarios, bridging finance is likely to be a great option as your buyer is likely to make the transaction. Open bridging is usually offered in residential bridging loans when you are purchasing a new property before you have sold your current property without trading contracts.

It is important to have an exit plan in place when making the loan, as it is a short term solution. However, due to the rising popularity in the loans, it isn't simply personal property who is interested in this anymore. Now it is seen as a realistic alternative for buy-to-let property managers when they are making quick moves on property which comes on sale in very competitive areas. Due again to the boutique nature of the bridging loan, they are often complete within a few days based on your personal situation.

Overall, bridging loans are now a very realistic alternative to traditional property financing methods, and are very useful due to their speedy and bespoke nature. It is important to not consider this your only option as there are others out there, but if you have a credible exit strategy, this could very well save you from months of heart ache!

Written on behalf of Balmoral Bridging who arrange business related bridging finance, between £250,000 and £1M against UK residential properties.