For most of us, there’s a no bigger or more important investment in life than the homes we live in. Precisely why the relocation process has a tendency to be stressful from start to finish.
Needless to say, the last thing you want is to face the prospect of letting your dream home slip through your fingers, while waiting for your current property to sell.
Unfortunate, but a common issue encountered by millions of movers each year. You put your current home for sale, you begin searching for the perfect property to buy and you find exactly what you’re looking for. Only to then be beaten to the punch by another buyer.
The question is – what can be done to bridge the gap between buying and selling a home? Is there a way of locking-down your dream property in a fast, effective and affordable manner?
With bridging finance, accessing the equity tied up in your home is made surprisingly simple.
What is a Bridging Loan?
A bridging loan is a specialist type of secured loan, designed to be repaid within a matter of months. Quite the opposite of a conventional mortgage, bridging finance is comparatively easy to organise and in no way time-consuming. Secured against the borrower’s current dwelling, bridging loans provide the opportunity to borrow considerable sums of money with no unnecessary complications.
In a typical scenario, a homeowner currently inhabits a property with a market value of £350,000. They’re planning to relocate to a different area of the country and have found their perfect property in their target market. The property they intend to purchase is up for sale at £250,000 and represents an unbeatable deal.
The problem being that as they’ve only just put their current home on the market, it’s likely to be some time before it sells and provides them with the funds they need to purchase the property. Thus, increasing the likelihood of another buyer beating them to it.
With bridging finance, the homeowner’s current property could be used to secure a loan worth up to 75% of its current market value. In this instance, approximately £262,000. More than enough to purchase the property and leave a little left over for admin, legal fees and so on.
Bridging loans rarely require deposit payments and can be made available within a matter of days. This gives the prospective buyer the opportunity to jump straight to the front of the queue and purchase the property outright. Just as soon as their current/former property sells, the funds can be used to repay the bridging loan in one lump-sum payment.
Because of the simplicity and short-term nature of bridging finance, bridging loan rates and overall borrowing costs tend to be significantly lower than those of traditional mortgages and longer-term secured loans.
An Effective Exit Strategy
Bridging loans are often issued upon the applicant’s ability to confirm an effective ‘exit strategy’ for the deal. That being, a guaranteed source of income within the allotted time-period to repay the loan. In the case of a homeowner selling a property, its value and appeal on the current market will determine its viability as an exit strategy.
Bridging the gap between buying and selling a home via bridging finance is, therefore, an accessible and affordable option. Just as long as you’re 100% confident in the imminent sale of your current property, you needn’t let the home of your dreams slip you by.
If considering bridging finance for any purpose, be sure to check out an online bridging loans calculator for more information on interest rates, overall borrowing costs and general terms.
Article by iConquer