Downsizing: How a Regulated Bridging Loan Can Expedite Your Move

Downsizing your home can be an exciting prospect, allowing you to free up equity and transition to a smaller property that better suits your current needs. However, the process of selling your existing home and purchasing a new one can be daunting and time-consuming. This is where a regulated bridging loan comes into play, offering a valuable solution to expedite your move and provide you with greater flexibility.

The Benefits of Regulated Bridging Loans for Downsizers

Regulated bridging loans, authorised by the Financial Conduct Authority (FCA), are specifically designed to cater to the needs of residential borrowers seeking to carry out refurbishments, renovations, or break a chain when purchasing a new property before selling their current home. These loans have gained popularity in recent years due to the financial pressures caused by the Covid pandemic and the subsequent cost-of-living crisis. In fact, according to MT Finance’s Quarterly Bridging Trends Survey, regulated bridging loans accounted for a significant 44% of all transactions in 2022, highlighting their increasing prominence.

For downsizers, regulated bridging loans offer several advantages. Firstly, they enable you to unlock the equity tied up in your existing property, providing you with the necessary funds to purchase a smaller property outright. This allows you to move swiftly and on your own terms, avoiding delays commonly associated with traditional property transactions. Once your current home is sold, the proceeds can be used to repay the bridging loan, completing the process seamlessly.

Dispelling the Myths: Cost and Duration of Bridging Loans

One common misconception surrounding bridging loans is the perceived high cost associated with them. While the headline interest rates of bridging loans may initially appear higher than those of standard residential mortgages, it’s important to consider the shorter term over which the interest is charged. Most bridging loans have a term of 12 months, but downsizers typically require the loan for a shorter period, usually between two and six months, depending on the speed of the property sale. This significantly reduces the interest payable.

To illustrate, let’s consider a £250,000 bridging loan with an interest rate of 0.6% over 12 months. If the loan is repaid within three months, the total cost would be approximately £257,800, resulting in a saving of £14,260 compared to the 12-month term. Repaying the loan within six months would cost £262,469, leading to a saving of £9,592. Even if the loan is repaid within nine months, the cost would be £267,221, resulting in a saving of £4,839. Furthermore, since downsizers typically have a loan-to-value (LTV) ratio of 50% or less, they can access the most competitive interest rates on the market, further reducing the overall cost of the loan. Automated valuations (AVMs) also streamline the process and contribute to additional savings.

Moreover, regulated bridging loans can be arranged swiftly, typically within three to five weeks. This makes them ideal for downsizers who are willing to pay for the convenience of gaining rapid access to finance, allowing them to proceed with their move without unnecessary delays.

Seeking Professional Advice for Bridging Loans

It’s important to note that bridging loans are typically available through mortgage brokers. Therefore, it is crucial for any borrower seeking this type of financing to consult with a professional service like An experienced mortgage broker can guide you through the process, ensuring you secure a solution that best suits your specific needs. They can dispel any myths or misconceptions surrounding bridging loans, providing you with peace of mind and expert assistance in navigating this important and complex area of the mortgage market.

In conclusion, downsizing can be made more efficient and seamless with the assistance of a regulated bridging loan. By leveraging the equity in your existing property, you can expedite your move and achieve greater flexibility in the home-buying process. While bridging loans may initially seem costlier, their shorter term and potential for significant savings make them an attractive option for downsizers. Remember to seek professional advice to ensure you make informed decisions and optimise the benefits of regulated bridging loans.

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