How a chain break bridge works
When a chain breaks, the purchase you have agreed can be lost unless you find another way to fund it. A chain break bridge provides that funding, secured on the property you are buying, the property you are selling, or both. When your sale completes, the proceeds repay the bridge.
Lenders look at the total borrowing against the total value of the security. If you already have a mortgage on the property you are selling, that is repaid or the bridge sits behind it, which affects the structure and the lenders available.
Interest is usually retained or rolled up, so there are no monthly payments during the term. The cost of the bridge is therefore driven by how long the sale takes, which makes realistic pricing of the property being sold important.
Regulated or not regulated
If you or a close family member live in, or will live in, the property the loan is secured on, the bridge is a regulated mortgage contract. This applies to most home movers using a chain break bridge, and it comes with additional protections. We will tell you at the outset if that applies and how your case will be handled.
If the purchase and the security are investment property, and nobody in your family will live there, the loan is usually not regulated. Investors and landlords use non-regulated chain break bridging to complete purchases while proceeds from another property are delayed.
Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Making the sale exit credible
The repayment depends on your sale, so lenders look closely at it. A property already on the market, priced realistically and with agent feedback, is a stronger exit than one that is yet to be listed. If a buyer withdrew, lenders may ask why, particularly if a survey raised issues.
- Agent valuation and marketing details for the property being sold
- Any offers received, and the current sale status
- Redemption figures for any existing mortgage
- Funds available to cover costs or a shortfall if the price is reduced
Choosing a term that allows for a slower sale avoids the cost of extending later. Indicative quotes from our panel help you plan, and final terms depend on the valuation and each lender's checks.
