Breaking the Mortgage Chain When Purchasing Your New Home

Becoming a homeowner for the first time isn’t necessarily easy, but the process is straightforward. You need your down payment, mortgage approval, and any other fees associated with securing the property. However, buying a new home when you have a mortgage on your existing home comes with additional complexity.

Unless you are incredibly lucky, you might not sell your current home right when you find the ideal property to purchase as your next home. And maintaining two mortgages might not be an option for everyone. So what is a savvy home buyer/seller to do? It is time to break the mortgage chain.

Breaking the Mortgage Chain When Purchasing Your New Home

The Challenges of Buying While Selling

When you own a home, a significant amount of your net worth can be tied up in your property. If you still have a mortgage on that house, it is challenging to tap the equity to help you secure a new home. The easiest way to get the flexibility you need is to get that mortgage paid off.

But securing funds in that amount isn’t easy. However, there are options that can let you pay off that mortgage, essentially transferring it to your next property, even if your first home hasn’t sold. A common method in the UK involves bridge financing.

Bridge Financing

Bridging involves securing a short-term loan against the value of your current home. This effectively removes the mortgage, even though the property serves as collateral to support the bridge financing. Then, you can obtain a mortgage on the home you are interested in purchasing.

You can make payments against the bridging loan, lowering the balance as with any other loan option. Once you finish the process of selling your old home, simply use the funds to pay off the bridging loan. Then, you are down to one mortgage, and you get to enjoy your new property.

Financing of this nature can be used to cover financial issues related to delays in selling even if you simply needed an extra day to close up the sales process, or even a few months. It covers the gap associated with the mortgage chain when you can’t time the purchase of your new home precisely with the sale of your current one.

For more information, visit

Credit and Income Requirements

While credit ratings do factor into the bridging process, the requirements are often not as strict as with other financing options. This is partly due to the fact that you are securing the loan with the value of your property. By having your property work as collateral, the bridging lender assumes less risk when approving your loan. Lower risk means a higher chance of approval and may yield more favorable interest rates compared to unsecured loan options.

In some cases, proof of income isn’t even required to be considered for this kind of financing. Precise qualifications can vary by lender, so it is important to look into all of the terms and requirements before moving forward with the loan.

Additionally, you need to adhere to the terms set forth in the borrowing agreement. Failure to repay in a timely manner can leave negative marks on your credit report and may affect your credit score. This can make financial products harder to obtain in the future or may result in higher interest rates.

Leave a Reply