Chain break finance

Chain break finance lets you buy a new home before you’ve sold your old one. We look at how it works and what you need to consider before taking it out.

Moving home can be one of the most stressful events you’ll experience and being in a property chain only adds to the stress.

Unless you’re a first-time buyer, you’re probably not in a position to buy a new home or get a mortgage on it until you sell your old one. If your buyers and the people you’re buying from can’t either, and this continues on either side of them, you could find yourself in a lengthy property chain.

This means that no transactions can take place unless they all do, and if someone drops out for any reason – for example, they can’t get the mortgage they were hoping for or they change their mind about selling – the whole thing can break down, leading to lost money spent on surveys and legal fees along with shattered dreams.

If there’s a problem with the sale of your property that means you might have to pull out of buying your new one and break the chain, there is a solution – chain break finance.

What is chain break finance?

Chain break finance is a type of short-term finance also known as a bridging loan. This is designed to bridge a funding gap so you can pay for something before you have the intended funds to do it – in this case, to buy a new home before you have sold your old one.

The loan essentially turns you into a cash buyer, so if your buyer has to pull out, you can still go ahead with your purchase and avoid losing your dream home. You then pay back the loan once your property is sold and you can get a mortgage on the new property if you need to.

As they are quick to arrange, you can also use chain break finance to buy a property quickly if you find your perfect home but don’t want to wait until you can sell your current one.

Being a cash buyer will put you in a stronger position than others, which could mean your offer is more likely to be accepted. You might even be able to negotiate a reduction in the price as you’ll be a safer bet than a buyer who is reliant on selling their home or getting a mortgage.

How does it work?

You take out the loan only until your existing property is sold. Once it’s sold, you then pay the loan back. It will usually be secured on your new home if you still have a mortgage on your old one, but it could be secured on your old property if you have enough equity in it. You can usually borrow up to 80% of the property’s value.

The term of the loan can be as little as one month, but you may need it for six months to a year to give you enough time to sell your old home. Interest rates are higher than for mortgages because it’s a riskier proposition for the lender, so the shorter the term the better. The higher the proportion of the property’s value you borrow, the higher the interest rate is likely to be.

Bridging loans can either be closed or open – closed loans have a fixed repayment date and are the cheapest type while open ones have more flexibility on when you can pay it back.

Although the lender will look at your finances and credit history when deciding whether to lend to you, it will focus mainly on whether your exit strategy (how you plan to pay off the loan) is viable. Your lender will want to be sure that your old home can be sold for enough money and quickly enough for you to be able to repay the loan at the end of the term.

If the loan is secured on your new property, the lender will also want to make sure its value is high enough to cover the loan since your lender will repossess and sell the property to get its money back if you can’t pay back the loan. However, you will often be able to renew or extend the loan to stop this from happening.

Chain break finance is quick to arrange, so you’ll usually have the money within one to two weeks.

Is chain break finance safe?

As with any loan secured on property, there is always the risk that you could lose your home if you can’t pay it back, but if the lender has made sure that your exit strategy is likely to be successful and lets you renew or extend the loan if necessary, this is unlikely to happen.

You’ll also have to keep paying for your mortgage as well as the interest on the bridging loan, but you usually have the option to “roll up” the interest rather than making monthly repayments and pay it all off with the loan at the end. Alternatively, the full interest amount can be taken from the loan at the outset.

The longer you have the loan, the more interest that will accrue, so you should look at how much this is likely to be to make sure you can afford it. You may also have to pay an arrangement fee to the lender.

If the loan is secured on a property that is or will be your home, it will be a regulated bridging loan. This means it will be regulated by the Financial Conduct Authority and will have to be sold to you according to the mortgage rules. You’ll have to be given clear information and advice by the lender or broker selling it to you to make sure you’re not taken advantage of.

Speak to a broker specialising in bridging loans to get the best deal for you.

Bottom line

Chain break finance allows you to go ahead with buying a new home if there’s a delay in selling your existing one, but make sure you’ll be able to afford the interest costs beforehand as it’s a relatively expensive way to borrow.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

More guides on Finder

  • Emergency fund: What it is and how to build one

    This type of savings account can save you from a lot of financial stress and anxiety.

  • What is capital gains tax?

    Want to know what capital gains tax is, how it works and when you need to pay it? Read our comprehensive guide on what you need to know about capital gains tax including what your CGT allowance is for the 2021/2022 tax year.

  • Monzo review: Is it worth it?

    Is Monzo’s app-only current account the right option for you? Read our review to get the low-down on all of the features of the account, its card and the app.

  • What is Compound Finance?

    We explore how to use Compound Finance for lending and borrowing.

  • Agricultural mortgage

    What you need to know about getting a mortgage if you’re buying or refinancing a farm or farmland, including the factors lenders consider when you apply for one.

  • Mortgage for a pub

    Everything you need to know about taking out a mortgage to buy or refinance a pub. Find out where to get one, how to get the best deal and the factors lenders consider.

  • Mortgage for a hotel

    In-depth guide to taking out a commercial mortgage to buy or refinance a hotel. Find out how to get the best rates, factors lenders consider and what you need to apply.

  • Bridging loan vs commercial mortgage

    Find out if a bridging loan or commercial mortgage would suit you if you’re buying or refinancing commercial property and when a bridging loan can be a better option.

  • How much deposit do I need for a commercial mortgage?

    Find out how much deposit you need if you’re taking out a commercial mortgage, including the factors lenders take into account, and how to get the best deal for you.

  • What is Yearn Finance?

    Learn how to use DeFi aggregator Yearn Finance to earn interest on your cryptocurrency.

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site