Be wary of bridging loans
Article Category: Debt Management Help and Advice
Homebuyers desperate to move homes should be wary of high-interest bridging loans, according to AA Legal Services.
James Molloy, from the organisation, says that although broken chains remain a "big issue" for homebuyers, they should take "appropriate advice" before taking out these types of loans.
Bridging loans are a way of allowing homebuyers to purchase a new property before selling their old home.
The loan, which is intended to be a short term solution and usually carries a high interest rate, is repaid when the previous house is sold.
Mr Molloy said: "My view on bridging loans are that unless absolutely unavoidable they should not be employed… if one is obtained as a last resort, it should only be used where the period is finite, i.e. after exchange.
"Bridging loans should never be considered a routine factor in protecting a chain."
Broken chains are a constant worry for many people in the home-buying process, which is easier in Scotland - once a commitment to buy is made, it is legally binding.
In England people need to wait until after the exchanging contracts stage before finally being able to breath a sigh of relief.
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