Bridging Finance for Broken Property Chains

What is a property chain?

When you become part of a property chain, you become reliant on every buyer and seller it connects. Irrespective of how buoyant the housing market may be, the risk of broken property chains remains high. Unfortunately, property chains have a tendency to collapse at the worst possible time, leading to catastrophic consequences for those involved. As there is nothing that can be done to repair a broken property chain, a better approach is to avoid becoming part of the chain in the first place.

This is precisely where bridging finance can help, affording borrowers looking to escape the property chains and the spending power of a cash buyer.

How can a property chain collapse?

Property chains can break down for a variety of reasons; the longer the chain, the higher the likelihood of something going awry at some point in the process. Just a few of the most common causes of collapsed property chains include the following:

• Somebody changes their mind about buying a property at the last moment
• A seller decides to withdraw their property from the market for any reason
• The survey conducted on a property uncovers major structural or safety issues
• A mortgage customer's application is rejected by the lender at a late stage
• Unexpected events such as bereavement or divorce, impact a buyer or seller
• A seller accepts a late higher offer from a competing bidder (aka gazumping)

Broken property chains are particularly frustrating in that they cannot be predicted or repaired. But they can be prevented by taking the steps needed to avoid becoming part of a property chain entirely. Most people do not have the on-hand capital needed to pay for their next homes outright, calling for a short-term financial solution to 'bridge' the gap between buying and selling.

How to avoid property chains with bridging finance

Bridging finance is issued with exactly these purposes in mind. A bridging loan can be secured against your existing property, thus giving you prompt access to the funds needed to purchase your next home. You effectively benefit from the flexibility and spending power of a cash buyer, enabling you to beat all competing bidders to the punch. Importantly, you are no longer reliant on the sale of your current home to enable the purchase to go ahead.

Bridging loans are designed to be repaid within a few months, making them ideal for short-term financial gaps like these. A brief look at how bridging finance works from a property chain perspective:

• You find the home of your dreams on sale at a price you can afford
• You apply for a bridging loan to fund the purchase (secured against your current home)
• Your loan is arranged and accessible within a few working days, enabling the transaction to go ahead with no delays
• You move into your new home, and your previous home remains on the market until it sells for the best possible price
• A few weeks or months later, your previous home sells, and you use the funds raised to repay your bridging loan

Charged at a rate of around 0.5% (or less) per month, bridging finance can be hugely cost-effective when repaid promptly. Either way, it is a small price to pay to avoid the risk associated with fragile and unpredictable property chains.