Would Bridging Finance be an Option for me and my Property Chain?

With the economic climate being what it is, only a lucky few can say, with a sigh of relief, that they’ve sold their old property and moved into their dream home. With mortgage terms and credit checks stricter than they’ve ever been, all it could take is one bad mortgage application for the whole chain to collapse.

Due to the problems that can arise due to mortgages not being approved or the amount you need being declined, some companies have started to offer short term bridging loans to allow you to move forward with buying your home.

This chain collapse often results in you not being able to move into your new house, leaving potential buyers for your current property stuck, and potential buyers for their property equally stuck, and so forth… A lot of the time it results in hefty financial penalties for all parties involved.

A way around this could be to lower the asking price for your property and asking the seller of the house you want to buy to lower theirs in turn. As expected, this scenario rarely runs smoothly, but it is worth bearing in mind that a lower asking price may be a small sacrifice if it saves you some psychological and financial hardships.

It’s not uncommon at this time in the property market for gazundering to make a reappearance. You could build a solid rapport with a buyer and find that at the last minute they lower their offer. If this does happen, it’s important not to feel disheartened and it’s also important to decline unreasonably low offers. It may mean that you have to explore other options and re-list your property.

To keep the chain intact in these tougher financial times, some companies have started to offer bridging loans. Typically between a month to a year, these loans are short term, and are typically in place until you sell your home. Competitive business rates will be available if you own assets that are of interest to these companies, and due to the nature of the market, most of these services are on a case to case basis.

There are two different forms of bridging loans; open and closed. An open bridging loan is the less certain of the two. It’s typically used before you have been able to sell your property, and before the exchange of contracts. A closed bridging loan is used in cases where contracts have been signed and exchanged and the deal is almost certain to go ahead.

Having an exit strategy is imperative when considering a bridging loan because it is a short- term fix. However, this hasn’t stopped bridging loans rising in popularity. Bridging loans have seen a rise in sectors outside personal property. For buy-to-let property managers, this has become a viable option in helping them make quick moves on properties that become available in highly competitive areas. Because of the personalised nature of bridging loans they are almost always completed within a few days.

Whilst there are other financing methods available, and the bridging loan will require you to have a credible backup plan because of it’s short term nature, it is a realistic and speedy option, and one that has the potential to save you time and heartache!