How bridging finance enabled a bungalow purchase before the existing home sold
A business-owning couple approaching retirement used a short-term bridge against the equity in their current home to fund their next purchase and associated tax while their existing property remained unsold.
Steve Verrell
Steve reviewed the clients’ available equity, existing mortgage, purchase costs and planned property sale together, structuring the short-term borrowing around the funds required and a clearly defined exit.
The case at a glance
- The challenge
- The clients had substantial equity in their current home, but the bungalow they wanted to buy was available before that equity could be released through a sale.
- The solution
- A retained-interest bridging facility, secured as a second charge against the existing home, funded the purchase and Land and Buildings Transaction Tax.
- The outcome
- The purchase could proceed without waiting for the existing property to sell, with up to twelve months available for the planned sale and repayment of the bridge.
Plenty of equity. Not enough liquidity at the right moment.
The couple had found a bungalow that suited the next stage of their lives. Their current home held substantial equity and only a modest outstanding mortgage, but the property had not yet sold. The difficulty was therefore timing rather than a lack of wealth.
Waiting for a completed sale would have meant risking the onward purchase. At the same time, arranging long-term borrowing purely to cover a temporary gap would not have matched the clients’ objective.
- The purchase could not wait for sale proceeds The capital needed for the move was tied up in the existing residence and unavailable until a buyer completed.
- The borrowing was intended to be temporary The clients wanted a facility designed to be repaid when their current home sold, rather than a larger long-term mortgage.
- The exit had to remain credible The existing property needed enough saleable equity to clear the first-charge mortgage, the bridge and associated borrowing costs.
Use the existing home as the bridge between two transactions.
Steve structured a bridging facility around the clients’ current property and the planned sale. The lender took a second charge behind the existing residential mortgage, allowing the available equity to support the short-term borrowing without first redeeming the original mortgage.
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Set the required net funds
The facility was designed to provide the money needed for the bungalow purchase together with the associated Land and Buildings Transaction Tax, while preserving the clients’ available cash reserves.
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Secure the bridge against existing equity
A second charge was taken over the current home, sitting behind its modest first-charge mortgage and making use of the substantial equity already held in the property.
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Retain the interest and plan the sale exit
Interest for the agreed term was retained within the gross facility, so there were no monthly interest payments during the bridge. The planned sale of the existing home provided the route to repay the borrowing.
A short-term problem needed a short-term funding structure.
The clients’ established business income and wider financial position were relevant to the underwriting review, but the defining features of the case were the strength of the security and the repayment route. The current home contained enough equity to support the bridge while leaving a meaningful cushion after the existing mortgage and proposed facility were taken into account.
That made the planned sale a clear exit strategy. Rather than asking a mainstream residential lender to solve a temporary deposit gap, the bridge was structured around the property equity already available and the point at which it was expected to become liquid.
The bungalow purchase could move ahead without forcing the existing sale.
The final structure provided the funds required for the purchase and associated tax while giving the clients up to twelve months to complete the sale of their current home. Because the interest was retained, they did not need to make monthly interest payments during the agreed bridging term.
Most importantly, the timing of the two property transactions no longer had to match exactly. The clients could proceed with the bungalow while keeping the sale of their existing home as the defined repayment route for the short-term borrowing.
When a home move is blocked by timing rather than a lack of assets, the quality of the exit plan can be as important as the equity itself.
Understanding this type of bridge.
Can bridging finance help me buy before my current home has sold?
Potentially. A chain-break bridge can provide short-term funds where sale proceeds from an existing property are not yet available. The lender will still assess the property being offered as security, the total borrowing and the credibility of the proposed repayment route.
Can my existing home still have a mortgage on it?
It can in some cases. In this case the bridge was secured by a second charge behind the existing first-charge mortgage. The amount of available equity, the lender’s security requirements and the overall structure all need to be assessed.
What does retained interest mean on a bridging loan?
Retained interest is calculated for the agreed period and held within the gross facility rather than paid monthly by the borrower. That can reduce monthly cash-flow pressure, but it also increases the gross borrowing and the amount to be repaid from the exit.
What if the existing property takes longer to sell?
The term should include sensible contingency because property sales can be delayed. If the planned exit begins to slip, the borrower should review the position early. An extension or alternative refinance may not be available and, where it is, additional interest and fees can apply.
Need to buy before your current home has sold?
If equity is tied up in an existing property and the timing of your onward purchase cannot wait, start by reviewing the security, the net funds required and the route for repaying any short-term borrowing.
Understand your options before you commit. Your initial conversation, assessment and presentation of suitable options are free, with no obligation. Any fees are explained before you decide whether to proceed.
Steve Verrell
The adviser behind this caseEnquire with the Willow team. Share a brief outline of the property, the timing issue and the planned exit.
Enquire with the Willow team Prefer to call? 0207 082 5175- 01 Tell us your objective The property, timing, funds required and what needs to happen next.
- 02 We assess the whole picture The available equity, existing secured debt, costs and proposed exit.
- 03 Decide with clarity Review appropriate options, trade-offs and costs before proceeding.
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