Brokers have had many frustrations to deal with this year, with frequent rate changes to deal putting a squeeze on customer affordability. Another issue has been the length of time that some property transactions are taking to complete, with the protracted process often leading to transactions falling through.
In this environment, there has been a significant increase in demand for regulated bridging amongst buyers whose sale has fallen through and, in some cases, have taken the decision to use bridging to put themselves in a stronger position or expedite the process.
For those who are looking to move quickly, bridging finance can usually be accessed faster than a term mortgage and we work with lenders that are committed to providing funding at pace, often using AVMs to increase speed. Conveyancing is frequently the primary cause of delays in a property transaction, and we have lenders on our panel that can offer joint legal representation, which can make the process more efficient.
For home movers, a bridging loan can release the equity from a buyer’s current property, putting them in a stronger purchasing position and giving them greater control of the transaction.
There are some considerations when using bridging finance in this way. In the first instance, by simultaneously owning two properties, additional Stamp Duty is payable upon purchase of a second property. This can be claimed back once a buyer is able to sell their current property, but they will need to have these funds available to pay the increased Stamp Duty at the point of completion on the new property. A bridging loan could additionally be used to secure funds for these costs if the amount of equity available across the properties permit.
A regulated bridging loan is only taken for a maximum of 12 months, and while rates may look higher than the term market, it can help to save a transaction, potentially saving customers thousands of pounds in lost costs and it could put a buyer in a powerful position to negotiate, enabling them to secure a discount on the property they are buying which helps to offset these costs.
We think the use of bridging to help home movers smooth the overall process is a trend that is only going to continue to grow as we move into 2024, and at Brightstar, we are always available to help you to help keep your clients moving.
Stephen Watts, Bridging & Development Finance Specialist