Bridging Loans: A Lifeline for Homebuyers

bridging loans lifeline homebuyers

Defying all projections, the UK’s property market has enjoyed a stellar year; average house prices have broken all records, monthly sale completions are at an all-time high and demand continues to outstrip supply in all regions of the UK.

Competition for desirable properties has become ferocious on an unprecedented level. Consequently, those who encounter delays or disruptions during the purchase process are often finding themselves being beaten to the punch by rival buyers.

With demand at an all-time high, lenders are finding themselves with inevitable backlogs and bottlenecks to deal with. Mortgage completion times have been on the up for much of the past year, making it difficult for would-be buyers to take advantage of time-critical opportunities.

One of the many reasons why bridging loans have become a popular choice for homeowners is because it is a flexible and cost-effective option for preventing their property purchases from falling through.

Bridging Loans for Faster Property Purchases

To put the benefits of bridging finance into context, consider this typical everyday example:

You have been scouring the market for a new home when you find your dream property at an unbeatable price. It is well within your budget, but you have not yet found a buyer for your current home. This is where bridging finance can help, it can be secured against your current home and repaid in full when you sell it.

Bridging loan completion times typically average just two weeks. The loan is secured against your current home, providing the fast-access funds you need to buy your new property, after which the loan is repaid in full a few months later using the proceeds raised from selling your former home.

With monthly interest rates starting from less than 0.5%, bridging loans can be far more affordable than any comparable loan or mortgage.

The same benefits also come into play in the event of a home sale that falls through at the last minute. It could be that you have a buyer lined up for your home and everything seems to be in place, only for them to pull out unexpectedly at the worst possible time.

Rather than such a scenario costing you your dream home, an affordable bridging loan could be used to buy your new property.

A Reliable Exit Strategy

As bridging finance is designed to be repaid as quickly as possible, it should only be considered with a reliable exit strategy in place. If you are 100% confident that your current home will be successfully sold within a few months, the facility could be surprisingly affordable.

Bridging finance is not a viable option for long-term borrowing; monthly interest rates of less than 0.5% are highly competitive in the short-term, but could prove costly if the loan remains unpaid for some time.

If interested in using a bridging loan to help you purchase your dream home, we can help. Contact a member of the team at UK Property Finance anytime for an obligation-free consultation.