Case Study: How Bridging Finance Helped a Couple Buy Their New Home Before Their Sale Completed

The Situation

Mark and Lisa had found the family home they wanted to buy for £550,000. They had accepted an offer on their existing property and had a buyer in place, but delays in that buyer's mortgage application meant their sale was moving slowly. The seller of the new property was not prepared to wait indefinitely, and with no certainty on when their sale would complete, Mark and Lisa faced the real prospect of losing a property they had set their hearts on.

A standard residential mortgage was not an option in this situation. Their deposit was tied up in their existing home, which had not yet sold. They needed to complete quickly, and a conventional mortgage application would not move fast enough to meet the seller's timeline. Without a solution, the purchase would fall through.

The Challenge

The core problem was a timing mismatch. Mark and Lisa had the financial strength to proceed with the purchase, backed by the equity in their existing property, but that equity was not yet accessible. They needed a short-term solution that could move at the speed the transaction required, with a clear plan for repaying the finance once their sale completed.

They also needed to fund stamp duty at the higher rate that applies when buying a second property before the first has been sold, which added to the total funds required beyond the purchase price alone.

The Solution

J Finance arranged a residential bridging loan that allowed Mark and Lisa to complete the purchase of their new home immediately, without waiting for their existing property to sell.

The bridging loan was secured against the new property as the primary charge, with a comfort charge also taken against their existing home. The loan-to-value across both properties combined provided sufficient security for the lender to proceed.

The key details of the arrangement were as follows. The loan amount was £300,000, representing a loan-to-value of 65% against the new property. The term was set at twelve months, providing sufficient headroom around the expected completion of their sale. The interest was structured on a rolled-up basis, meaning no monthly payments were required during the loan term. Interest accrued and was added to the outstanding balance, with the full amount repaid when the loan was redeemed. This was important for Mark and Lisa because they would be managing two sets of housing costs during the bridge period and preferred not to service monthly interest payments on top of their existing mortgage.

The exit strategy was straightforward and clearly documented from the outset: the bridging loan would be repaid in full from the proceeds of their existing property sale once it completed. The lender was comfortable with this exit on the basis of the sale already being agreed and progressing, with a buyer in place.

The loan was arranged and completed within ten days, which gave the seller of the new property the certainty they needed and allowed the purchase to proceed without further delay.

The Outcome

Mark and Lisa completed the purchase of their new home and moved in without any further delays or complications. Their existing property sold three months later, at which point the bridging loan, including all rolled-up interest, was repaid in full from the sale proceeds. The total cost of the bridge was therefore limited to three months of interest rather than the full twelve-month term, as the exit occurred significantly ahead of the loan's expiry.

The higher-rate stamp duty cost was funded within the loan, meaning they did not need to find those funds from savings at the point of purchase. Once their existing home sold and they were no longer the owner of two properties simultaneously, they were able to claim the stamp duty surcharge refund from HMRC, as they had sold their previous main residence within the three-year window that allows this.

What Made This Work

Several factors came together to make this a straightforward bridging case with a clear and successful outcome.

The exit strategy was credible and already in progress. A buyer was in place for the existing property and the sale was proceeding, which gave the lender confidence that the loan would be repaid within the term. Bridging lenders place significant weight on the quality of the exit strategy, and a sale already under way is considerably more compelling than a property not yet on the market.

The combined loan-to-value across both properties was conservative, providing the lender with adequate security even if either property value moved somewhat during the loan term.

The rolled-up interest structure suited the clients' cash flow position during the bridge period, removing the need to service monthly payments while managing the costs of two properties simultaneously.

The speed of arrangement was critical. A standard mortgage process would not have delivered funds in time to satisfy the seller's timeline. Bridging finance, structured correctly and submitted to the right lender, was able to move at the pace the transaction required.

Could Bridging Finance Help You?

Bridging finance is not the right solution for every situation, but in cases where timing is the primary obstacle it can be exactly what is needed. Common scenarios where it is worth considering include buying before your existing home has sold, purchasing at auction where completion is required within 28 days, breaking a stuck property chain, or buying a property that does not currently meet standard mortgage criteria and needs renovation before a long-term mortgage can be arranged.

If you are considering bridging finance or want to understand whether it might be appropriate for your situation, we are happy to have a no-obligation conversation.

Call us on 01635 521300 or email contact@jfinance.co.uk to speak with an adviser.