Chain Break Bridging Loans: Key to Seamless Home Purchasing

Purchasing a property and discovering your chain has broken just days before completion is a major setback. It’s stressful and means that you’ll have to start the search for a home all over again.

Broken chains are more common than you may realise. In fact, in 2024, a staggering 28.8% of property sales collapsed. Nearly a third of buyers who put a property offer found their sale falling through before completion.

The reality is that property chains are a weakness in the UK property market. When a chain breaks, it can affect all of the properties that are part of that chain.

Chain break bridging loans have been created to help property buyers avoid the stress of their chain breaking, and complete their purchase.

In this article, you’ll discover everything you need to know about chain break bridging loans:

• what chain break bridging loans are
• why property chains collapse so often
• how these bridging loans save a sale
• what features to look for in a chain break bridging loan
• some real life scenarios when these loans are a godsend

What Is A Chain Break Bridging Loan?

Chain break bridging loans are designed to help you to buy the property you want when your chain breaks. It’s an emergency solution for when the rest of your property chain collapses at the last minute.

Chain break bridging loans work as an alternative for the buyer higher up the chain. When your chain breaks, you can’t complete your purchase on your new property.

However, bridge loans for a broken property chain enable you to complete the purchase, and then you have time to sort your property chain out again.

A chain break bridging loan is usually repaid by the sale of the property that was broken, that you were buying previously.

Why Do Property Chains Break (And How Often)?

I’ll let you into a little secret here…

Property chains are surprisingly weak and prone to collapse. According to the latest data, 19% of all collapsed sales specifically broke due to a problem in the chain. That’s almost 1 in 5 sales that fell through due to chain issues.

The most common reasons for a chain collapse are:

• buyers simply changing their minds or getting cold feet
• mortgage applications being turned down
• survey issues or problems with the property
• personal circumstances of a party in the chain changing
• gazumping or gazundering which disrupts the chain

The harsh reality is that when property market conditions are tough, it can take weeks or even months to fix a broken chain. When market activity is slower, there aren’t enough buyers to quickly replace one at the top of a chain.

How Do Chain Break Bridging Loans Work?

Chain break bridging loans are extremely simple and work as follows.

Let’s say you have a property valued at £400,000, that is fully paid off. You find the property that you have always wanted to buy. It costs £350,000, you offer this amount, it gets accepted by the seller, and the purchase is agreed.

But when you’re due to complete, the buyer at the top of your chain pulls out. This causes a chain collapse and means that you can’t buy your property.

Rather than starting the search for a new property all over again, you take out a chain break bridging loan. This gives you the money you need to complete your new purchase, which you secure against your existing home.

When your original property sells, you repay the bridging loan.

The bridging loan will typically last between 3-18 months. Interest is paid on a monthly basis and while it is higher than a standard mortgage, this comes with the convenience and flexibility of being able to complete on your new property.

When Chain Break Bridging Loans Make Sense

Chain break bridging loans aren’t always necessary, but they are useful if your property chain collapses.

Chain break bridging loans make sense in the following scenarios:

• You have already found your dream property, and don’t want to lose out on it.
• The property that you are purchasing is a good value or undervalued.
• You have a lot of equity in your current property.
• You are confident that your property will sell within 6-12 months.
• The emotional or practical cost of finding a new property is too high.

One thing to note is that the cost of a chain break bridging loan could be less than the cost of losing your dream property and having to start all over again. If you’ve spent ages looking for the perfect property in the right area, it could be worth it to pay the bridging loan interest and complete it.

Key Features To Look For

Selecting the right chain break bridging loan product is crucial. Different bridging lenders offer different products, and the wrong choice could cost you thousands of pounds.

The key features to look for include:

• Flexible repayment terms, with no penalty for early repayment
• Competitive interest rates
• Fast completion times – bridging lenders typically fund in days or weeks, not months
• Transparent fees, with no hidden arrangement or exit fees

The biggest mistake that people make is applying for the first loan they see without shopping around.

Compare a minimum of 3-5 bridging lenders and negotiate on interest rates. Even a difference of 0.5% per month can add up when you are repaying over a 12-month period.

The Costs Involved

Chain break bridging loans aren’t cheap, but in many cases, they are worth the cost.

The typical costs that you will face include:

• Monthly interest rates of between 0.5% and 1.5% of the loan amount
• Arrangement fees (typically 1-2% of the loan)
• Valuation and legal fees
• Exit fees on repayment (though many lenders will waive these)

A chain break bridging loan of £300,000 at 1% per month will set you back £3,000 per month in interest. For a 6-month bridging loan, this would equate to £18,000 in interest plus fees.

But the cost of losing your dream property and starting the property buying process from scratch again is much higher.

Alternatives To Consider

Chain break bridging loans aren’t the only solution for avoiding the consequences of a broken property chain.

Alternatives to consider include:

• Negotiate with the seller for more time to fix your chain.
• Finding a chain free buyer by working with property buying companies.
• Renting your property instead of selling.
• Borrowing from family or friends in the short term.
• Using savings or investments.

None of the above provide the same level of speed, flexibility and certainty as bridging finance.

When your property purchase is at risk, time is your enemy.

The Application Process

Applying for a chain break bridging loan is quicker than you think, and most lenders will offer and release funds within 1-2 weeks.

The typical application process includes:

1. An initial consultation with your bridging finance broker
2. Valuation of your current property
3. Credit checks and affordability assessment
4. Formal loan offer and legal documentation
5. Funds released directly to your solicitor

The key to a smooth application is having your paperwork ready in advance. This will include proof of identity, bank statements, and information on both properties.

Making The Right Decision

Chain break bridging loans are not for everyone, but in the right scenario they can be exactly what is needed to complete a purchase.

Ask yourself the following questions before applying for a chain break bridging loan:

• Can I afford the monthly interest payments?
• Am I confident my property will sell within the loan term?
• Have I considered all other options?
• Is this property worth the additional cost?

If you answered yes to all four questions, a chain break bridging loan could be just what you need.

What You Need To Remember

Property chains break all of the time, which is why it’s important to have a backup plan in place. Chain break bridging loans are the ideal safety net to stop a broken chain from stopping your property purchase.

The key is to act fast and select the right lender. Bridging costs are a small price to pay when your dream home is on the line, so don’t let a broken chain ruin your property dreams.