Talk about home repossessions, and most people will conjure images of bankruptcy or an over-leveraged property market that’s hit rock bottom. The reality for many people is that being faced with a repossession often looks very different.
While home repossessions are a possibility when you’ve missed several mortgage repayments, this can happen for several reasons. It’s important not to get tied up in the details: ultimately, there are many different reasons why you could be faced with repossession of your home. What you do in response to the situation is often more important than why you’re there in the first place.
It is important to note that a potential repossession is not necessarily linked to a drop in your overall net worth. For many people, a possible repossession is almost always about cash flow or due to an unexpected financial challenge rather than something like total bankruptcy. As such, helping clients avoid repossessions is something Enness deals with more often than you might think.
Bridging loans are a short-term financing solution. You can borrow for a few months and up to three years. When used to stop a repossession, the proceeds of your bridging loan can be used to effectively pay off your mortgage. You retain ownership and use of your house for the duration of your bridging loan, giving you enough time to deal with your situation.
How you pay back your bridging loan is referred to as your exit. Often, a bridging loan will give you a comfortable amount of time to sell your home, and you exit by repaying the loan once you’ve sold the property. Alternatively, you can use other incoming capital to pay off the loan – something like a divorce settlement, inheritance or sale of a company is common. Again, don’t get caught up in the details: if you know you’ll come into capital during the loan term and will use it to pay back your bridging loan, Enness can make a case to lenders.
Refinancing can be an option, but if you are facing a repossession, it is one of the less likely scenarios. Here, you’d refinance your loan at the end of your bridging finance term, opting for a longer-term and cheaper finance package. For this to be a possibility, your financial situation will need to have changed significantly.
Bridging loans can be helpful if you are faced with repossessions because they help you solve a problem without having to liquidate other assets to pay off your home loan.
Liquidating assets can theoretically appear to be the ‘perfect’ solution to any number of challenges, but the subtleties of doing so don’t make it practical. Sometimes your assets will be illiquid. In other scenarios, your wealth will be tied up in your business and you can’t or don’t want to sell. There is always an opportunity cost, too. Selling assets or securities before they have matured is likely to impact your returns, putting you at a disadvantage.
Lastly, the sheer speed you will need to move with to stop a repossession makes selling assets impractical. If you are faced with a repossession, you will need to move quickly. Bridging finance is ideal as you will be able to access finance fast – it’s often possible to draw down funds in as little as one or two weeks.
Bridging finance to stop repossessions does have restrictions. Lenders will be open to letting you borrow if you are in a tight spot and are facing a repossession, but not if you are in severe financial difficulty. If you have a lot of other debt, won’t be able to make interest repayments, or you are dealing with multiple financial challenges, bridging finance is unlikely to be a workable solution.
If you are faced with a repossession, you’ll have very little time to go knocking on doors. You may also want to keep your situation relatively under the radar and not share your situation with various lenders. Enness’ brokers will be able to present a bridging finance solution quickly, often giving you an initial offer in just 24 hours. They will know exactly where to go, and which lenders will be able to let you borrow and who won't be phased by your scenario. Enness will also make sure you aren’t paying more than you need to just because you’re facing repossession.
Being faced with a repossession is highly stressful. Enness’ team will support you at every step of the way to find a workable bridging finance solution that helps you avoid repossession wherever possible.
If you are interested in learning more about bridging finance or if there is a scenario you would like to discuss, don’t hesitate to get in touch.