How to break the chain
A housing ‘chain’ can be an unfortunate place in which to find yourself.
Moving to a new home is stressful enough. You really don’t need the added worry of relying on other home-buyers to sell and move on schedule so that you can move on your desired date.
Chains can sometimes be lengthy with a whole series of buyers/sellers needing to co-ordinate the exchange of contracts and the actual process of moving. The longer the chain, the greater the chance of something going wrong. A ‘break’ anywhere in the chain means no-one can move.
Breaking the chain
There are many reasons that the chain might break.
Among the most common is that one of the buyers finds that he or she cannot get a mortgage on the property he/she was planning to buy – for example, if there is a bad survey report. Or personal circumstances change – someone loses a job (or gets offered one somewhere else), has an accident, becomes ill or any one of a number of things.
Sometimes this will just lead to a short delay. Sometimes it will be a permanent break that means your chain needs to be built up again ‘from scratch’.
Some market experts say that one in four planned property transactions falls through for one reason or another.
Being in a chain is not only stressful but it can also be expensive. Non-refundable mortgage fees, survey costs and solicitors’ fees may all be lost if someone else in the chain pulls out.
You might even lose your dream home if you are not able to buy when you planned to do so and the seller finds another buyer. Then you really are back at the start of the house-buying process all over again!
Break the chain yourself
It is possible to break the housing chain yourself – but in a positive way. This might actually put you who in a stronger position with buyers who often prefer a quick and certain transaction rather than waiting for a third party who may or may not move on time.
However, as with most things when it comes to housing, there are also drawbacks to breaking the housing chain – so make sure you get plenty of advice from professionals and look at all of your options before you decide.
Read below for some helpful ways of breaking the chain.
Selling your property before you buy
If you want to buy a new home and be completely ‘chain free’ you could consider selling your home first. If you have time on your side and don’t feel the pressure to sell quickly, you might be in a better place to accept the offer you want rather than feel you ‘have to go for it’.
The downside of selling before you buy is that you might have to rent for a while (or live with kind family and friends) before you purchase your new property. You will also have two sets of moving costs (from your existing home to a rented one and then moving from there to your new home). If you opt to move in with friends or family you will still have to move your belongings into storage and back out again - and, of course, you will have the storage costs to pay.
Use a bridging loan
Bridging loans are designed to help people complete the purchase of a property before selling their existing home by offering them short-term access to money. However, they are usually provided at a high rate of interest.
It is called a ‘bridging loan’ because you use it to ‘bridge’ a gap between you buying a new house and selling your previous house. However, because it is a stop-gap measure, it can be significantly more expensive than a ‘normal’ loan. The lender cannot secure the loan against the value of your existing property if that is already mortgaged so will see the loan as relatively ‘high risk’ – and charge interest accordingly.
If you want to take out a bridging loan, it is advisable to go to an FCA-regulated broker because they will only recommend a bridge if it is appropriate for you and your circumstances.
Extending the mortgage on your existing home
If you don’t want to be stuck in a housing chain, you might consider extending the mortgage on your existing property and using that money as a deposit on your new home.
Once you have exchanged the contracts and you move into your new home, you can then rent out your other property and use the rent from that property to cover the new mortgage payments.
This is known in the industry as ‘let to buy’ and will give you the opportunity to sell your existing property at your own pace, aiming to get the best price.
Part exchange is when one item is traded against another. If you want to buy a new house, you can part exchange your existing property.
Although this is sometimes done when you are buying a ‘second hand’ home it is rare – few sellers are set up to handle a part exchange. Far more common is the use of part exchange to help you buy a brand new house.
The builder of the new property will buy your current property and will deduct this from the price of your new home.
Larkfleet Homes will offer this and other schemes to help buyers who meet certain criteria- see the details here.