You have decided to downsize and are looking to purchase a property with a much lower market value than your current home. In which case, why would you consider taking out a bridging loan?

If the home you live in is more valuable than the property you intend to buy, where is the logic in applying for bridging finance? There are actually several reasons why taking out bridging finance for property downsizing could be a good idea.

The Financial Challenges of Downsizing

Relocating to a new home is never cheap. Irrespective of whether the home you are moving into is less valuable than your current home, there are various costs to factor in. Legal fees, estate agent fees, conveyancing fees and so on. Then there are the costs relating to the logistical aspects of moving to consider.

By taking out a downsizing loan (i.e. a specialist bridging loan), you could equip yourself with the supplemental cash needed to cover these and other costs. An additional £10,000 or so (to be repaid in full when you sell your current home) could come in surprisingly handy.

Increasing the Value of Your Property

Along with covering the additional costs of the move itself, bridging finance can also be used to make money when downsizing. Irrespective of the size, type, location and condition of the home you live in, chances are a few enhancements and improvements could significantly increase its market value.

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A loft conversion, a new kitchen, a conservatory, garden landscaping – just a few home improvements known to increase property values far beyond the costs of carrying them out.

The idea being that you take out a small bridging loan to cover the costs of the renovations, sell your home at a higher price and repay the loan in full shortly afterwards, all while hanging on to the profits as a bonus.

How Do Downsizing Loans Work?

Bridging finance for downsizing is relatively simple – particularly when compared to conventional loans and mortgages. Lending criteria differs significantly from one lender to the next, but the basics of downsizing loans look a little like this:

  • Loans available from £10,000 to £2 million+
  • No upper age limits for applicants
  • Can be secured against most types of properties
  • No initial application fees
  • Loan to value (LTV) of up to 100%
  • Flexible terms from 1 to 18 months available
  • Monthly interest rate as low as 0.5%
  • Poor credit applicants welcome
  • No proof of income required
  • Funds often released within a few working days

The quickest and easiest way to get a downsizing loan is to consult with an independent broker, in order to get to know the available options.  With absolutely no obligation to go ahead, an established broker can conduct a complete search of the market on your behalf, ensuring your requirements are met with an affordable deal from an established lender.

For more information on any of the above or to discuss downsizing loans in more detail, contact a member of the team today.


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