At a glance
- Lets you buy before your current property sells
- Closed bridge: your sale has exchanged and the date is fixed
- Open bridge: no confirmed sale yet, so lenders want a strong plan
- Usually regulated, because it involves your home
What is a chain break bridging loan?
A chain break loan is a bridging loan that covers the gap between buying your next property and selling your current one. It is typically used when a buyer pulls out late, or when you have found a home you do not want to lose and your sale is not ready.
The loan is usually secured on your current home, the new home, or both, and is repaid when your sale completes.
Open and closed bridging
Closed bridging is used when you have already exchanged on your sale and know the completion date. The exit is certain, so lenders see it as lower risk.
Open bridging has no fixed repayment date because your sale has not exchanged yet. Lenders will want evidence that your property is realistically priced and saleable, and may limit the term to 12 months. Open bridges are more common in chain breaks, but they carry more risk for you if the sale takes longer than planned.
How much can you borrow?
Lenders usually look at the combined value of the properties they take security on and the total debt against them, including any mortgage on your current home. As a guide, maximum LTVs across the security are commonly around 70% to 75%. If you have plenty of equity in your current home, it may be possible to borrow the full purchase price of the new one.
You will normally need to show you can afford the new home long term, for example through a mortgage offer, or that the sale proceeds will clear the bridge.
Regulation and protection
Because a chain break loan usually involves a home you live in or will live in, it is normally a regulated bridging loan under FCA rules. That means affordability checks and clear information on costs and risks. See regulated vs unregulated bridging loans.
Costs and risks
Interest is charged monthly for as long as the loan runs, so a sale that takes three months longer than expected can add a significant cost. Before going ahead, work out the cost over a realistic worst case, not just the best case. You may also be carrying two mortgages or loans at once, plus council tax and bills on two properties.
Price your current home realistically. Reducing the price to sell faster can cost less than several extra months of bridging interest.
Frequently asked questions
Can I buy a new house before selling my old one?
Yes. A chain break bridging loan is designed for this. It is repaid when your old home sells.
What is the difference between an open and closed bridging loan?
A closed bridge has a fixed repayment date because your sale has exchanged. An open bridge does not, because the sale is not yet agreed or exchanged.
How long does a chain break loan last?
It lasts until your sale completes. Regulated bridging loans are normally up to 12 months.
Is a chain break loan regulated?
Usually yes, because it involves your home. That brings FCA protections such as affordability checks.
What if my house does not sell in time?
You may need to extend the loan, which adds cost, or reduce your asking price. Some lenders may take action against the security if the loan is not repaid. Plan for a slower sale than you expect.
Important: Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Think carefully before securing other debts against your home.
This page is general information, not financial advice. Bridging Finance Comparison is a free to use lead generation service run by The Lead Advisory Company Limited. We are not a lender and do not give advice. We introduce enquiries to Curzon Financial, who are authorised by the Financial Conduct Authority (FCA), who may provide advice and arrange finance where appropriate. Rates, fees and criteria depend on your circumstances and the lender.