Chain break bridging loan: Can it help you to secure your property?

9 March 2024

Written by Scott Lord

Deputy Chief Mortgage & Operations Officer – Front End

Market Financial Solutions are a bridging loan and buy-to-let mortgage provider and are not legal, financial, investment or tax advisers. This document is for informational purposes only and does not, and should not be considered, to constitute legal, financial, investment or tax advice or be relied upon by any person to make a legal, financial, investment or tax decision. Therefore, Investors are encouraged to seek appropriate professional advice. The information in this content is correct at time of writing.

In the last few years property chains have lengthened and regularly, borrowers are affected by broken property chains. Panic sets in, stress level rises, the deal is about to fall through. But there is a no-panic solution to save the day: a chain break bridging loan.

What is a property chain?

A property chain refers to the number of buyers that are dependent on one another’s property transaction. For example, a property chain exists if you own a property already but need the funds from the sale to finance another property. On the other hand, your buyer might be dependent on a sale of their property.

The longer the housing chain, the greater the risk that a property chain breaks. This could put your property transaction at risk of collapsing.

Top 5 reasons why a property chain breaks

Reason No 1: Sale not completed on time & it falls through

Mainstream finance can take, on average, 3 months to complete. Property investors do not usually have this much time to complete on a deal they are looking to purchase.

For property homebuyers, they may need to first sell a property before buying. Should their sale be delayed, they will be unable to use their funds to complete on their purchase.

Reason No 2: The buyer pulls out

Sometimes, buyers pull out. This could be due to a funding issue, they find a more subtle property, or maybe they’ve had concerns they aren’t willing to ignore. Whatever their reason, it can put you in a compromising position.

Reason No 3: Issue with funds

Arranging traditional finance has a lot of boxes that need ticking before you can move forward. During this process, minor discrepancies can create issues for mainstream lenders. This could draw your process to a halt whilst everything is being checked over.

Reason No 4: Person cannot buy your place and you’re stuck

If there is an issue with your property, then you may need to renovate or make a property conversion to entice new buyers. This can be a long process and can add pressure for you and your sellers.

Reason No 5: You’re being gazumped

The seller of your desired property might accept a higher offer, even after the sales was already agreed. Unless you want to up your offer and possibly enter a bidding war, the property would go to the other bidder.

How to minimise the risk of a property chain breaking

Here are a few things you can do to help minimise the risk of a broken chain:

Arrange finance in advance: This will allow you to continue with your property purchase without the worry that the lender may pull out.
Communication is key: Make sure you’re actively speaking to all those involved. This includes your estate agent and your solicitor, as well as your buyers and sellers’ solicitors too.
Speak up: If you’re worried about an issue, be sure to discuss this with your solicitor straight away. The more time you have, the less likely this will affect your exchange of contracts or completion.
Timeframe: Asking for an initial timeframe at the beginning of the process can give you a benchmark date to work with. Of course, things change, and delays can occur. If things look to be moving too slowly however, this could indicate an issue that needs resolving.

The Complete Bridging Loans Guide

All you need to know

Download Now

The solution to chain breaks: bridging loans

If your property chain breaks, do not panic. There are alternative, short-term loans available that can help your purchase over the finishing line.

A chain break bridging loan is an alternative way to finance your property sale if you’re looking to break free from property chains, minimise the risk or fix a broken chain. You won’t need to rely on the sale of your property. On the contrary, you can continue without worry of collapse due to lack of funding or should your lender pull out latest minute.

Mainstream finance can take months to complete, and lenders can refuse or pull out, leaving you stranded. With our chain break bridging loans, you can borrow up to £50m in as little as 3 days. Whether you’re looking for a residential chain break bridging loan, auction finance, commercial chain break bridging loan or you’re an overseas investor looking to buy UK property, Market Financial Solutions’ bridging finance can bridge the gap short-term until you are able to figure out long-term finance or have sold your property.

Alternative finance also allows lenders like us to take a step back and view the overall picture. Our application process is done on a case-by-case basis. This allows us to lend on complex cases or applicants who have special circumstances such as adverse credit. You can find out more about who we lend to here.

There are many ways you can exit a loan, and our directed underwriters will support you throughout the entire process. Contact our team today.

As you can see, there is no need to panic when your property chain breaks. A chain break bridging loan will secure your purchase, even in complex circumstances.