With UK mortgage arrears rising by 25% in 2023, more homeowners are seeking ways to solve the problem of property repossession.
If you’re falling behind on mortgage payments, you’ll know the stress and pressure of trying to find a solution. While bridging loans aren’t right for everyone, they can offer a lifeline when you need to stop repossession proceedings and buy time to sell your property at its true value.
We’ll show you exactly how bridging loans could help prevent repossession, who should consider them, and what you need to know before making any decisions.
What Happens When You Face Repossession?
Most homeowners don’t realise that lenders must follow strict procedures before they can repossess a property. Each step offers opportunities to resolve the situation if you act quickly and understand your options.
The process generally starts after you’ve missed several mortgage payments.
Your lender will contact you to discuss your situation and explore possible solutions. These might include payment holidays, extending your mortgage term, or temporary reduced payments.
Only when these options have been exhausted will they consider court action.
If you receive a court summons, you’ll get a hearing date where a judge reviews your case. At this stage, you can still prevent repossession by showing you’ve found a way to clear your arrears or have a solid plan to sell your property.
Here’s what many people don’t know: selling your property yourself always gets a better price than letting it be repossessed.
A repossessed property often sells for 15-20% below market value. This is where bridging loans can make a real difference – giving you breathing space to achieve full market value rather than accepting a rushed sale.
How to Stop Repossession with Bridging Finance
Bridging loans work differently from standard mortgages because they’re designed to solve short-term financial gaps.
When used to prevent repossession, a bridging loan can clear your mortgage arrears immediately, halting the repossession process.
You then have time to either sell your property at its proper market value or arrange longer-term financing without the pressure of impending repossession.
Let’s look at a real example: James owned a house worth £350,000 with a mortgage of £200,000. After his business struggled, he fell £18,000 behind on payments. Rather than risk repossession and a forced sale, he used a bridging loan to clear the arrears. This gave him four months to sell his property properly, achieving full market value and leaving him with enough equity to start fresh.
The speed of bridging finance makes it particularly effective in repossession situations.
While traditional mortgages take months to arrange, bridging loans can complete in days or weeks. This quick turnaround can make all the difference when you’re facing tight deadlines.
Let’s talk bridging loans!
Is Bridging Finance Right for Your Situation?
Bridging loans work best in specific circumstances and are most definitely not a good option for everyone.
You’ll need enough equity in your property to secure the additional loan, and a clear plan for repayment. This doesn’t mean you need perfect credit – lenders focus more on your property’s value and your exit strategy than your credit history.
Good candidates for bridging finance include:
- Homeowners with significant equity who need time to sell
- People facing repossession due to temporary financial difficulties rather than long-term affordability issues
- Property owners confident about selling or refinancing within a set timeframe
- Those who can demonstrate a realistic exit strategy
Sarah inherited a property worth £280,000 but also inherited £30,000 of mortgage arrears. A bridging loan allowed her to stop the repossession process and gave her time to renovate and sell the property at its full value, rather than losing it at auction.
What Will a Bridging Loan Cost You?
Understanding the true cost of finance helps you make an informed decision. Unlike standard mortgages, bridging loans have several different cost elements you need to consider.
The main costs include the interest rate on your loan, which gets charged monthly. You can choose to pay this monthly or ‘roll it up’ and pay everything when you repay the loan.
Rolling up interest helps with cash flow but increases your overall debt.
You’ll also pay an arrangement fee to set up the loan, plus legal and valuation fees. A broker can give you a clear breakdown of all costs for your specific situation, helping you understand exactly what you’ll pay.
Remember that bridging loans use your property as security. Failure to repay the bridging loan on time will result in further legal intervention by the lender.
Read more: Is a Bridging Loan More Expensive Than a Mortgage?
Getting Your Bridging Loan Approved
The application process for a bridge loan is a lot shorter than for a mortgage, but you’ll still need to provide specific information. Your broker will need details about your property, current mortgage, and repayment plans.
Lenders look closely at:
- Your property’s current market value and condition
- The amount of equity available
- How realistic your repayment plan looks
- Local property market conditions that might affect your ability to sell
Most lenders can make initial decisions within hours.
Once you have an agreement in principle, solicitors handle the legal work to arrange the loan security. Having all your documentation ready speeds up this process considerably.
Why You Need Expert Help with Bridging Finance
Working with an experienced broker often makes the difference between success and failure when arranging bridging finance.
They’ll know which lenders are most likely to approve your application and can often secure better terms than going direct.
Brokers understand repossession timelines and can work quickly to find solutions. They have relationships with specialist lenders who might not deal directly with borrowers.
This becomes particularly valuable if your situation is complex or you need an extremely quick decision.
Your broker will structure your application to maximise its chances of approval. They’ll explain all costs and risks clearly, ensuring you fully understand what you’re taking on.
Most importantly, they’ll help you avoid common pitfalls that could delay your application when time is precious.
Other Ways to Prevent Repossession
While bridging loans can offer a potential solution, it’s worth exploring all your options. Each situation is unique, and sometimes combining different approaches works best.
Speaking with your current lender might reveal options you didn’t know existed.
Some lenders offer their own rescue schemes or can suggest alternative payment arrangements. Government schemes like Support for Mortgage Interest could help in certain situations.
Independent debt advisers can review your entire financial position and suggest strategies you might have overlooked. They often have experience with multiple cases similar to yours and can share what’s worked for others.
Getting Free Help with Repossession
Before making any decisions about bridging loans or other financial products, you should speak with a free debt counselling service.
These organisations offer expert advice without charge and can help you understand all your options.
StepChange Debt Charity and National Debtline provide specialist support for people facing repossession.
Their advisers understand the legal process and can often suggest solutions you might not have considered. They’ll look at your entire financial situation, not just your property issues.
These organisations can:
- Review your income and expenses to find potential savings
- Help you negotiate with your current lender
- Explain your legal rights and options
- Look into whether you qualify for government support
- Suggest debt solutions that could help prevent repossession
You can contact StepChange on 0800 138 1111 or National Debtline on 0808 808 4000.
Both services offer online chat if you prefer not to speak on the phone. They’re open Monday to Friday, and some services run at weekends too.
Housing charities like Shelter also offer specialist advice about preventing repossession. Their advisers understand both the practical and emotional impact of housing problems. You can reach Shelter’s free helpline on 0808 800 4444.
Many people find speaking with debt advisers helps them feel more in control of their situation. They can explain complex terms in plain English and help you create a plan of action. Most importantly, they’re completely independent and won’t try to sell you any financial products.
Remember, getting advice early gives you more options. Don’t wait until the last minute to seek help – contact one of these organisations as soon as you start worrying about mortgage payments or repossession.
Taking Action to Save Your Home
If you’re facing repossession, bridging finance could give you the breathing space needed to resolve your situation. The key is acting quickly and getting professional advice about your options.
Every case is different, and what works for one person might not suit another.
Speaking with an experienced broker will help you understand if a bridging loan fits your circumstances. They’ll guide you through the process and help find the most appropriate solution for your needs.
Don’t wait until it’s too late to explore your options.
Contact our team today for a confidential discussion about preventing repossession. We’ll help you understand all your choices and find the right path forward.
FAQ
With the right broker, bridging loans can be arranged in as little as 5-10 working days. The exact timeline depends on your property’s documentation and the complexity of your case.
Most lenders require at least 25-30% equity in your property after accounting for the bridging loan. Higher equity levels will secure better rates.
Bad credit is less important for bridging loans than traditional mortgages. Lenders focus more on your property’s value and exit strategy.
Yes, if you have sufficient equity and a clear exit strategy. Lenders focus on your property’s value rather than your income.
Yes, you’ll need a solicitor to handle the legal aspects. Many brokers can recommend specialists experienced with bridging loans.
Read more: Do You Need a Solicitor for a Bridging Loan?
Yes, bridging loans are available for buy-to-let properties. The process is often simpler as these loans aren’t regulated in the same way as residential property loans.
No, not at all.
Everyone’s circumstances are different and bridging loans will only be suitable for a few people.
The best initial course of action would be to speak with a debt counsellor.