If you have ever gone through the process of buying a new house while trying to sell your current one, you may have experienced the awful scenario of it all falling through. If the buyer of your existing home suddenly has a change of heart, it can lead to you losing the potential home of your dreams. Extended property chains can result in heartbreak and frustration when one person along the chain decides not to buy or sell. Unfortunately, these situations cannot be avoided, but frustration and disappointment can be! A bridging loan is a short-term finance option for those who experience a delay between sale completion and accessing credit (the mortgage on your new property). A bridging loan helps you to bridge the gap between these two dates and help you secure the property you want to purchase.
How do bridging loans work?
If the buyer of your current property (the one you are leaving) lets you down or there are delays with the completion of the sale, a regulated bridging loan will help you to secure the new property while problems and delays with your old property are ironed out. Once the sale of your old property goes through, the bridging loan is paid down.
Types of bridging loan
There are two main types of bridging loan available, and both will help you to secure your new property while you wait for the sale of your old property.
The first type of bridging loan will simply cover the purchase of the new property, allowing you to ensure that you don’t lose your new house in the event of unforeseen delays.
The second type of bridging loan available to customers covers the cost of the new property in addition to covering any necessary refurbishment work to your new property or your old one. This can be particularly helpful if the sale of your old property fell through because the buyer insisted refurbishment take place before purchase, e.g. the property requires a new boiler.
Bridging loan interest rates and fees
Just as mortgages can be fixed-rate or variable, so too can bridging loans. A fixed-rate means that the rate of interest is fixed across the entire term of the loan, meaning that each monthly payment will be the same. A fixed-rate loan is an excellent option to ensure financial stability, so if you only have a set amount budgeted for repayments, then this would be a good choice.
A variable interest rate is one which changes over the term of your loan. The rate can go up as well as down and is often influenced by the Bank of England’s base rate, which changes frequently. If you have more manoeuvre room within your budget and will be able to tolerate higher monthly payments sometimes, then a variable interest rate is a good option for taking advantage of potentially lower interest rates in the future.
However, when it comes to bridging loans, because the loan is intended for only a short timeframe, most people will not be affected by changing interest rates. If this is of particular concern to you, make sure to contact your lender for more information.
Getting a bridging loan
Bridging loans are available from mortgage brokers and mortgage advisors. They are not typically available from mainstream banks and building societies. They are also not available on price comparison websites as a bridging loan will be very specific to your needs and circumstances.
While taking out a bridging loan is generally cheaper and quicker than applying for a mortgage, you will still have to provide evidence of income. Bridging loan lenders will carry out a thorough credit history check and verify your ability to make repayments. Lenders will usually require new property valuations of your current and prospective properties, the cost of which will be your responsibility.
Advantages of a bridging loan
A bridging loan gives you peace of mind when you are selling your old property and buying a new one. So, if a delay occurs somewhere along the property chain, you will no longer have to give up on completing the sale on your new home. Repayment of the loan will be made on the sale of your old property, and you can move into your new one without any additional debts over your head (aside from your mortgage). You will have the luxury of flexibility when completing one of life’s greatest stressors!
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Improve your chance of securing a bridging loan
By consulting reputable mortgage brokers, such as our advisors at Orchard Mortgage Solutions, we will search for the best-specialised deals so that you can find a bridging loan best suited to you.
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Andrew was extremely knowledgeable and helpful throughout the whole process. He offered great insight and his advice was exceptional. Fantastic service, would highly recommend.… More
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We recently completed a remortgage within 4 weeks with Orchard Mortgage Solutions. The service provided was exceptional and communication was top-notch, Andrew kept us informed… More every step of the way. The team at Orchard Mortgage Solutions were professional and efficient and made the entire remortgage process seamless and stress-free. We felt well taken care of during the entire transaction and we were impressed by their dedication to customer satisfaction.We cannot say enough good things about this company and will be using them for any future mortgage needs.Thank you, Orchard Mortgage Solutions, for a job well done!
I recently had the pleasure of working with Orchard Mortgage Solutions, specifically with Andrew, to secure a mortgage as a first-time buyer. I cannot express enough how grateful… More I am for the exceptional service and support I received throughout the entire process. One aspect that truly impressed me was the time and effort Andrew spent explaining complex mortgage information in plain English. As a first-time buyer, I had many questions and concerns, and Andrew patiently walked me through each step, ensuring I fully understood the details. His ability to simplify complex concepts made me feel confident and empowered in making informed decisions.The communication from Orchard Mortgage Solutions was top-notch. The team were always prompt in responding to my inquiries, providing updates, and keeping me informed of any progress or changes. Their clear and concise communication style made the entire process smooth and stress-free. What sets Orchard Mortgage Solutions apart is their friendly and personable service. Andrew's approachability and willingness to go the extra mile made me feel valued as a customer. He took the time to understand my unique needs and provided solutions that aligned perfectly with my requirements.I cannot recommend Orchard Mortgage Solutions enough, especially for first-time buyers. Their dedication to providing exceptional service, combined with Andrew's expertise and friendly demeanour, made the mortgage process a positive and enjoyable experience.
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I recently had the pleasure of working with Orchard Mortgage Solutions, and I must say that my experience was nothing short of exceptional. From start to finish, the team, led… More by Andrew Stewart, demonstrated a level of professionalism and expertise that exceeded my expectations.One aspect that truly stood out was the speed at which Orchard Mortgage Solutions operated. They were incredibly efficient in processing my mortgage application, ensuring that everything was handled promptly and accurately. This allowed me to move forward with my plans without any unnecessary delays.The service levels provided by Orchard Mortgage Solutions were truly outstanding. The team was attentive, responsive. Their commitment to delivering a seamless and stress-free experience was evident in every interaction. I highly recommend contacting to Orchard Mortgage Solutions.
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I recently had a fab experience with Andrew and the Team at Orchard Mortgage Solutions! They helped me to secure a mortgage for my new home, which wasn't an easy task!Throughout… More the entire process, they were patient (with my many questions!), helpful, friendly and the level of customer service was fantastic with a very quick response time!They even took advantage of the lengthy time it took our solicitors to complete by reapplying for the mortgage when the rates dropped!Overall, I highly recommend Orchard Mortgage Solutions to anyone in search of a mortgage!
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I recently had the pleasure of working with Orchard Mortgage Solutions and from the very beginning, Andrew was patient, understanding and so helpful in explaining everything to… More me. Nothing was too much trouble. Throughout the entire mortgage process, Orchard provided updates, and explained each step in a simple and easy-to-understand manner. I would highly recommend.
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