What is a property chain?
When you are buying a new property and selling your old one, you enter ‘a property chain’.
A property chain, or housing chain, occurs when a series of house transactions are linked together. If one person decides not to go ahead, it can have a domino effect on the rest of the chain, affecting the subsequent buyers and sellers.
What is chain break bridging?
Chain break bridging can help you access the finance you need to purchase a new property before your current house has sold. In other words, it helps you break the property chain and secure your dream home.
These solutions are short-term borrowing options. The idea is that the loan covers the gap until you have sold your old property, then you will pay the loan back in full.
This option can last up to 12 months and uses your property as security against the loan. This means should you fail to repay the loan; your property could be repossessed.
Our dedicated team have helped many customers get this solution to secure their dream home, so they may be able to do the same for you!
Before taking out this option, you need to make sure you have your exit strategy (your plan to repay the loan) laid out.
Why would you need a chain break bridging loan?
Bridging loans are commonly used when you want to buy a new property but haven't sold your current house, so you lack the funds needed to do this.
It can also be helpful if you had someone lined up to buy your current property, but they back out at the last minute. When a property chain collapses like this, you may not have the funds needed to complete your next purchase.
By using a chain break bridging loan, you can purchase your next property, without having to rely on the sale of your old property. This allows you to move forwards with your plans and reduces the stress that can be associated with a property chain falling through.
Essentially, these solutions give you the money you need quickly, so you do not miss out on the property you have your heart set on. In other words, they help you break the 'housing chain'.
Our specialist advisors are used to assisting people in these circumstances, so they could help you achieve the same.
Examples of when a property sale may collapse
Delayed exchange – If the exchange of contracts are delayed for whatever reason, it can force the chain to break. This may happen if there are delays in completing the conveyancing process, or if there are issues with the buyers financing.
Gazumping -This is a term for when a seller accepts a higher offer from another buyer after already accepting an offer off someone else. This can cause the entire chain to collapse if the original buyer is unable or unwilling to raise their offer.
Survey issues –If a survey reveals issues with the property that were not previously known, it could cause delays, or even result in the buyer dropping out. This can hold up or break the chain.
The buyer pulls out of the sale – Buyers can pull out of a sale for many reasons. For example, they may find another property they prefer, or decide they don’t want to move.
Advantages and disadvantages of chain break bridging
Advantages
- Faster purchase – By using this solution you are able to complete your purchase quickly and efficiently, without being dependent on the sale of your own property.
- Avoid delays and stress –Property chains can be unpredictable and can often lead to delays and stress. Chain break bridging can help you avoid these problems and ensure you secure the property you’ve had your sights set on.
- Secure your dream property –Using this option can help you take your dream property off the market before someone else has the chance to make an offer. If you had to wait for your current house to sell before you can proceed, somebody else may have snapped up the property you wanted.
Disadvantages
- Higher interest rates- This option can often come with higher interest rates, which can make them quite expensive. Therefore, there is the chance that you could end up paying more than you would have if you were able to sell your old property first.
- Short-term solution – Chain break bridging are short-term borrowing solutions, so the window you have to repay will not be long. If you are unable to sell your property and pay the loan back in this timeframe, you could face hefty penalties.
- Your home is at risk of being repossessed– As the loan is secured against your property, if you fail to repay it your house is at risk of being repossessed.
Am I eligible for a chain break bridging loan?
Each lender will have their own criteria and processes specific to their products, so it depends on which provider you go with.
The biggest qualifying criteria is that you need to be a property owner, as this asset will be taken as security against the loan. If you meet this basic criterion, it could be a possibility for you.
It may be useful to get in touch with a specialist broker or finance professional who can help you access this type of finance.
Our experts have access to a wide range of lenders, with many different solutions. Our experts can help match you to a lender and product that is suitable for your circumstances, and most importantly that you can comfortably repay.
How to minimise any risks involved with chain break bridging
Like any loan, there can be risks when using a bridging loan to break a property chain. To avoid these risks, it is important to make sure you are well informed.
Firstly, you may want to seek professional advice from a mortgage broker or financial advisor. They could help you understand the risks and costs associated with this funding solution. They could also help you find a product that suits your specific needs.
It is also important you understand the repayment terms; this includes the interest rate, fees, and any penalties for late payment or default.
To be accepted for these solutions you must have a clear exit strategy in place, which is your plan for how you will repay the loan. If you do not have this mapped out, lenders will be reluctant to let you borrow from them.
Lastly, make sure to plan. This might involve working with your estate agent to ensure a speedy sale of your old property.
Why choose The Loans Engine for your Bridging needs?
We can offer you specialised advice based on your individual circumstances. Our trusted advisors will always try to find the most suitable product to meet your needs.
With over 35 years’ worth of experience, and a Feefo Platinum Trusted badge, you know you are in safe hands.
Our specialists will work with you to get your application processed as quickly as possible, so that you can access the funds you need fast.
Why not give us a ring and see what we can do for you. We do not use automated phone menus; you will get through to a real person on our team when you call.
