Bridging Finance to Stop Repossessions

Talk about home repossessions, and most people will conjure images of bankruptcy or an over-leveraged property market that has hit rock bottom. The reality for many people is that being faced with repossession can look very different.

While home repossession can become a possibility after several missed mortgage repayments, there are many different circumstances that can lead to this situation. It is important not to get caught up in the details: ultimately, there are various reasons why you could be facing repossession, and what you do in response is often more important than how you got there in the first place.

It is also important to note that a potential repossession is not necessarily linked to a reduction in your overall net worth. For many people, the risk of repossession is primarily a cash-flow issue or the result of an unexpected financial challenge rather than total bankruptcy. As a result, helping clients explore ways to avoid repossession is something Enness deals with more often than you might expect.

Using Bridging Finance To Stop Repossessions

Bridging loans are a short-term financing solution. Depending on the lender and circumstances, you can borrow for a few months and potentially for up to three years. When used to help prevent a repossession, the proceeds of a bridging loan can potentially be used to repay your existing mortgage. You retain ownership and use of your home during the bridging loan term, giving you additional time to resolve your financial situation.

How you repay your bridging loan is referred to as your exit. In many cases, a bridging loan can provide enough time to sell your home, with the loan repaid from the proceeds of the sale. Alternatively, you may have other incoming capital that can be used to repay the loan, such as a divorce settlement, inheritance or the sale of a business. If you know that you expect to receive capital during the loan term and intend to use it to repay the bridging finance, Enness can present this as part of your case to suitable lenders.

Refinancing can also be an option, although it may be more difficult if you are already facing repossession. In this scenario, you could refinance the bridging loan at the end of its term, moving onto a longer-term and potentially lower-cost finance package. For this to be viable, your financial circumstances will generally need to have improved sufficiently for a longer-term lender to consider the application.

Bridging Loans Vs Selling Assets To Stop Repossession

Bridging loans can be useful if you are facing repossession because they may allow you to address the immediate problem without having to liquidate other assets to repay your home loan.

Liquidating assets can appear to be a straightforward solution to a financial challenge, but there can be complications. Your assets may be illiquid, for example, or your wealth may be tied up in a business that you cannot or do not want to sell. There is also an opportunity cost to consider. Selling assets or securities earlier than planned can affect your investment strategy and potentially reduce the returns you might otherwise have achieved.

Speed is another important consideration. If you are facing repossession, you may have a limited window in which to act, making the process of selling assets impractical. Bridging finance brokers can help you explore solutions quickly, and in some circumstances it may be possible to draw down funds within one or two weeks.

Restrictions

Bridging finance to help prevent repossession does have restrictions. Lenders may be willing to consider borrowers who are facing a short-term financial difficulty, but this does not mean bridging finance will be suitable in every situation. If you have substantial existing debt, cannot afford the associated interest or are dealing with multiple significant financial challenges, bridging finance may not be a workable solution.

Why Enness?

If you are facing repossession, you may have very little time to approach multiple lenders yourself. You may also prefer to keep your circumstances confidential rather than explaining your situation to numerous potential lenders. Enness’ brokers can help present a bridging finance solution quickly, with an initial indication potentially available within 24 hours depending on the circumstances. They will know which lenders are more likely to consider your situation and can help identify an appropriate financing structure.

Being faced with repossession is highly stressful. Enness’ team can support you throughout the process, helping you explore a workable bridging finance solution and, where appropriate, a route that may help you avoid repossession.

If you are interested in learning more about bridging finance or have a specific scenario you would like to discuss, speak to a mortgage specialist.