Leaving your new purchase to the last minute, may prevent you from using main-stream finance if you are still wanting to take advantage of the temporary stamp duty holiday.
The deadline is already beyond the current reported processing times for most standard mortgage products thus making it impossible to underwrite and approve before March 31st.
Given the potential delays and complications brought about by the third national lockdown, lenders are taking longer than normal to issue their mortgage products to potential homebuyers, but this does not necessarily mean that all hope is lost, even with only a few weeks of the stamp duty holiday left.
Purchasing a property using a traditional mortgage within the next few weeks may be out of the question, however, arranging a property purchase with a bridging loan is still a perfectly viable option.
How Does Bridging Finance Work?
Bridging finance is a secured form of lending, which in many respects works in a similar way to a mortgage, however, it is a facility available often to those who already own properties with sufficient value to cover the costs of the loan.
First-time buyers who do not currently own any major assets of value are unlikely to qualify for bridging finance unless they have a large deposit.
For movers looking to sell their home and purchase a property before the stamp duty deadline, there is still time to arrange a bridging loan. Bridging finance differs from traditional lending in that the funds can be released within a matter of days, often less than a week after the initial application.
The funds are secured against the applicant’s property, and subsequently repaid in one lump sum. The bridging funds could be used to buy the new home, taking advantage of the stamp duty holiday, and then repaid in full, from the sale of the current home.
How Much Does a Bridging Loan Cost?
Bridging loan rates differ from one lender to the next, which is why shopping around for a good deal is essential. In addition, the Loan to Value and how quickly it is repaid will also influence loan affordability.
In a typical example, a bridging loan issued for a property purchase to be repaid within six months could attract an interest rate of 0.5% per month or less. Therefore, the faster a bridging loan is repaid, the more cost-effective the transaction becomes.
In this instance, the funds would be used simply to ‘bridge’ the gap between purchasing a new home and selling an existing home. This may therefore mean that the loan could be repaid within just a couple of months, bringing overall borrowing costs down to absolute minimums.
Getting a Good Deal on Your Bridging Loan…
Even with bridging finance, the clock is ticking for anyone looking to take advantage of the temporary stamp duty holiday.
If you would like to discuss the potential benefits of bridging finance in more detail or get your application under way, we would be delighted to provide you with an obligation-free consultation at your convenience.