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How to Compete Against a Buyer with No Onward Chain
The mortgage process is notoriously slow-moving — we explain how you can compete with cash buyers when you're facing an onward chain.
Written by Luka Ball
According to research from Zoopla, cash buyers now make up 30% of home sales in the UK. How can you compete if you’re using finance to purchase a property?
Being a cash buyer in the UK housing market brings many advantages. The ability to move quickly, negotiate better deals, and avoid the complications of mortgage financing puts you in a strong position. Whether you’re looking for flexibility, cost savings, or simply peace of mind, buying with cash can give you a significant edge in a competitive market.
If you have the means to purchase a property outright, the benefits are undeniable. Cash buying offers greater control over the buying process and the potential for substantial financial savings. Whether you're investing or looking for your dream home, cash buying is a strategy worth considering in the ever-changing landscape of the UK housing market.
Whether you’re a seasoned investor or a first-time buyer with access to cash, purchasing a property without the need for a mortgage opens up a whole realm of opportunities. In this blog post, we’ll explore the key benefits of being a cash buyer in the UK housing market and why that can put you in a powerful position.
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What Are the Advantages of Being a Cash Buyer?
Is Having a Mortgage Worth it?
Are There Alternatives to a Mortgage?
Getting an Edge in the Buying Process
What is an Onward Chain?
An onward chain refers to a sequence of property transactions where each sale is dependent on the completion of another. For example, when a homeowner sells their property, they may need the funds from that sale to purchase their next home.
If the person they are buying from is also relying on selling their home to move, and so on, this creates a chain of buyers and sellers all reliant on each other to complete their transactions. Chains can sometimes slow down the buying process, as delays or issues in one link can affect the entire chain, potentially causing the whole sequence of sales to collapse.
What Are the Advantages of Being a Cash Buyer?
1. Better Negotiating Power
When you’re a cash buyer, sellers take notice. Why? Because there’s no risk of a mortgage being denied, and this is valuable.
The mortgage application process can be arduous. There are a variety of tension points where things can go wrong, and the sale could fall through, which can be challenging for both the buyer and the seller.
For buyers, the funds sunk in a mortgage application, alongside the disappointment of losing their stake in a home they had hoped to buy, can be a significant source of stress.
For the seller, a failed house sale could impact the purchase or their next home.
Because of this, purchases with cash buyers tend to be faster and more reliable, which means sellers can prefer them. This makes it easier for cash buyers to negotiate on price, especially in a housing market where time is of the essence.
Sellers facing financial pressure or looking for a quick sale are often more willing to accept lower offers from cash buyers, knowing the deal is more likely to go through without any complications.
2. Freedom to Buy Non-Mortgageable Properties
Mortgage lenders often have strict requirements about the type of property they will finance. For example, mortgage lenders may deem properties with short leases, structural issues, or non-standard construction too risky. Cash buyers are not constrained by these limitations and can purchase properties that are unsuitable for traditional financing.
This opens up more opportunities, especially in niche markets such as auction properties, renovation projects, or properties with potential planning issues. Cash buyers are often better positioned to take advantage of these opportunities, which can lead to acquiring valuable properties that others might overlook.
3. A Faster, Smoother Buying Process
If you’re buying with cash, you can generally act a lot quicker. A mortgage typically takes around a month to complete, and even then, there can be complexities that make the process longer.
The mortgage process is subject to paperwork, lender assessments, and property valuations. Cash buyers bypass all of this, often reducing the time it takes to move from offer to completion significantly.
Additionally, the administrative burden is lighter for cash buyers. There are no lengthy checks from mortgage providers, fewer surveys, and less back-and-forth between solicitors, lenders, and valuers. This streamlined process saves time and reduces the stress of waiting for approvals, which can delay or even derail a purchase.
4. Reduced Risk of Sales Falling Through
In the UK, property transactions can collapse for several reasons, many of which are related to issues with a mortgage application. According to a report by Which?, nearly 1 in 5 property sales in the UK fall through. For buyers dependent on a mortgage, any hiccup in the lender’s approval process could result in delays or even the deal collapse.
Cash buyers are far less likely to face these issues. Without a mortgage, there's no risk of a loan rejection, causing the sale to fall apart. Moreover, cash buyers are often chain-free, reducing the complexities and dependencies that can derail a transaction. This makes the process smoother, giving both buyer and seller more confidence in the deal.
Is Having a Mortgage Worth it?
Of course, mortgages are the most popular form of property finance for a reason. Mortgages are secured loans, which makes them more affordable than most types of loans. There are costly application and surveyor fees, but these pale in comparison to what can be saved with an affordable interest rate. Even now, mortgage rates are reasonable compared to other loans.
The costs and the rather nail-biting application process are generally considered worth it for the security of knowing the property you are buying has been surveyed and that you can feasibly afford your loan payments in the long term.
Furthermore, while just under 1/3 of UK properties are bought with cash, that means over two thirds are bought with finance. A mortgage chain can be an inconvenience for both buyers and sellers, but they are familiar and widely accepted parts of purchasing a home.
Are There Alternatives to a Mortgage?
There are situations where it pays to act quickly when buying a property. For example, you could have found a bargain property at auction, or you may have fallen in love with a new home...and other buyers have, too.
But for most buyers, purchasing a property outright simply isn’t feasible. Even for those who do have enough savings to buy a property with cash, it may leave them with rather limited capital in the bank.
In these circumstances, a bridging loan can be an option. Bridging loans are short-term funding solutions that release funds in as little as 1-2 weeks. They are commonly used to fund property purchases where the borrower needs to act quickly or where there is a gap in funding between two payments – such as buying a house while waiting for another one to sell.
In cases like this, bridging finance can offer you the speed and flexibility to act like a cash buyer while still using secured finance.
Watch our video below - Bridging Loans Explained: Costs, Timescales, Examples, & How To Get One:
Bridging loan case studies
Read through our 100+ bridging loan case studies, breaking down the details of how bridging loan transactions work in practice:
Getting an Edge in the Buying Process
If you're not sure what options are out there or what funding solution would be most suitable, it’s worth working with a specialist broker. At Clifton Private Finance, our dedicated team can help you understand your options and decide whether a mortgage or bridging loan would be suitable for you.
We are an independent brokerage, and we’ll always work on your behalf to find you the most suitable solution that aligns with your long term financial goals. We can use our network of lenders to give you an advantage in your application and search the market for the best options for you.
Call us today on 0117 205 4838 to see how we can help, or book a consultation with us below.
FAQs
Understanding the difference between net and gross calculations is essential when comparing deals from bridging loan lenders. The calculation determines the maximum LTV (Loan-to-Value), how much you can borrow, and how much you will eventually repay. Here’s the difference: When calculating the net loan amount for bridging loans, the borrower deducts the loan costs and additional fees (such as the arrangement fee) from the total loan amount - this is known as net loan calculation. Contrary to that, gross loan calculation is based on the loan amount the borrower can receive without deducting any costs or fees. In brief, the gross loan calculation represents the total amount available to the borrower, while the net loan represents what the borrower ultimately receives after deductions. A common complication arises when it comes to comparing bridging lenders, as different lenders advertise their bridging loan products differently. The upshot of this, is that it can become difficult to determine if a higher LTV (loan-to-value) represents the actual amount you could receive. Lenders typically use a gross loan calculation when advertising or promoting their bridging loan products. This is because the gross loan amount represents the maximum loan amount the borrower is eligible to receive, and can be used as a marketing tool to attract potential borrowers. Nevertheless, the net loan calculation is used when negotiating an agreement, which is the amount the borrower will receive after deducting fees and other costs. Borrowers are responsible for repaying this amount, and lenders will use that amount to determine repayment schedules and other loan terms. How a broker can help with bridging loan calculations A broker can assist with bridging loan calculations by providing clarity, expertise, negotiation skills, and a comparison of loan options to help you make more informed decisions. A first charge bridging loan refers to a bridging loan that is the only charge against the property, i.e., there is no existing mortgage on that property. A second charge bridging loan is when there is already a mortgage on the property that the bridging loan is being secured against. In the event of repossession, the 'first charge' has the legal right to be repaid first, before the second charge, which is why second charge loans can be slightly more expensive as they're a greater risk to lenders. It is still entirely possible to secure a second-charge bridging loan and they are common within the industry. Yes, you can get a bridging loan with bad credit. While lenders will look at your credit score and factor it into your application, there is no requirement for regular loan servicing with a bridging loan, and so your income is not analysed and your credit score is significantly less important than with a mortgage. Almost all regulated bridging loans are short-term, and have a duration of 12 months. Bridging loans are short-term by nature. However, there can be some flexibility on term length, particularly for unregulated bridging. For example, bridging for development projects, flipping properties, buy to let bridging loans and commercial bridging loans can all have longer terms up to 36 months. Some bridging loan lenders allow you to extend your term if at the end of 12 months your property hasn't sold or your alternative funding hasn't come through yet - however, this is down to the lender's discretion and there are no guarantees. It's important to be aware of the risks of bridging loans, and your property can be seized and sold to compensate for failure to repay. A bridging loan exit strategy is simply the way in which you plan to repay your bridging loan. The most common exit strategies are selling an existing property, selling the property you're purchasing, refinancing with a mortgage, or a combination. Other more unique exit strategies can include selling a business, receiving a pending inheritance, or receiving a large tax rebate. Here are some of the most common alternatives to bridging loans: We break down each of these other financing tools in our full guide to alternatives to bridging loans. While none of these options provide the flexibility, loan size and low interest rates that bridging loans do for property transactions, you may find they are more appropriate finance options for your specific situation. No, there is no strict age limit for securing a bridging loan. Bridging loans are typically 12 months in duration, which means that there aren't age limits in place like there are for mortgages that can last for 25+ years. The main example where age may be an issue is if you plan to refinance your bridging loan with a standard mortgage. In which case, you'll need to be eligible for a standard mortgage to qualify for your bridging loan - and if you are approaching retirement age, this could be an issue and you may be rejected for a bridging loan. However, we work with specialist equity release and lifetime mortgage lenders that can provide a Decision in Principle for later-life lending (if it's feasible) so that your bridging loan can be approved if it makes sense with your broader strategy. There are two types of bridging finance: regulated bridging loans and unregulated bridging loans. It simply depends on the intended use of the property you're purchasing. When you or a family member intend to live in the property you’re purchasing with your bridging loan, you’ll need a regulated bridging loan. If you're getting bridging finance on property that you or a family member will not be living in, or if it’s a commercial property, then you’ll need an unregulated bridging loan (commercial bridge loan). And if you intend to sell the property to repay your bridging loan (flipping the property) instead of refinancing or selling another property, you’ll get an unregulated bridge loan. Regulated bridging loans are authorised and regulated by the FCA and are usually locked to a 12-month maximum term. Unregulated bridging loans, meanwhile, can have extended periods of up to 36 months and are generally more flexible. If you’re unsure, it’s best to speak to a qualified adviser to go over exactly what you need and find the best bridging loan for you. Yes, your bridging loan lender will require a new valuation to be carried out for all properties in your bridging loan transaction. In some cases, we can work with lenders that can facilitate a 'desk valuation', which is a valuation carried out online based on the local property market, images of the property and the specifications of the home - this can save a considerable amount in fees and speed up your application, but it's not always possible, especially for higher value properties. You can borrow up to £25m with bridging finance, but it’s typically capped at about 80% of the value of the property you’re using as security. It's important to note that different lenders have varying policies and criteria regarding the maximum loan amounts they offer for bridging finance. Some lenders have a maximum limit of over £1 million, while others may specialize in smaller loan amounts. Additionally, the terms and conditions of the loan, including interest rates and fees, should also be taken into consideration when determining the overall affordability of the bridging loan. You don't necessarily need a deposit for a bridging loan in the traditional sense of cash reserves, but you do need security for your loan in the form of another property or asset to keep the loan-to-value below 80% at a maximum. For example, if you're buying a £300k property with a £300k bridging loan, you'd need another property to secure the loan against along with the property you're buying, or else your loan to value would be 100%. You can effectively secure a loan for 100% of a property value, but only if you have other property as security to keep your overall loan-to-value below 80%. So, if you're getting a loan for 100% of a property value, you'll need another property in the background to secure it against. The easiest way to see if you're eligible is either to give us a call or use our bridging loan calculator that automatically calculates your LTV. Using funds from a bridging loan to purchase a property puts you in a strong position as a buyer - similar to that of a cash buyer. Being a cash buyer is attractive to sellers because there is no onward chain requirement, and the funds are ready to go for the purchase. Using a bridging loan also eliminates the need for the chain to complete, and puts you in a position where funds can be available in a matter of weeks for completion; effectively rendering you a cash buyer to prospective sellers. Regulated bridging loans (for residential properties) are typically 12 months, however, some non-regulated bridging loans for buy to lets and commercial properties can be up to 36 months. Some lenders are more flexible on term durations than others, and it can be a case-by-case basis as to whether you'll get approval for a longer loan term. Yes, you can use a bridging loan to pay Stamp Duty. This amount could be covered by a bridging loan, providing you have a way to repay the additional borrowing amount to your lender. Yes, bridging loans are generally considered safe provided they are used for suitable property transactions. Speaking to a bridging loan adviser is recommended if you're unsure about the risks and suitability of a bridging loan for your situation. Generally speaking, the main risk of a bridging loan is that if you cannot repay the loan, your property can be repossessed and sold to clear your debt. For example, if you take out a bridging loan to buy a new property but your existing property fails to sell and you cannot recoup the funds, this could become a risk. However, bridging lenders always require their own valuations for any property involved in a bridging transaction to combat this. Another example could be that you're unable to secure a mortgage to refinance your bridging loan. At Clifton, we make sure your remortgage plans are sound if this is your bridging loan exit strategy, and can even arrange your mortgage for you through our dedicated mortgage advice service on the other side to smooth the process. Bridging loans are designed to be short-term so there’s no maximum age limit when applying for a bridging loan. This does depend on the lender, as some bridging lenders do have an upper age limit, but there are lenders on the market who offer bridging loans for borrowers aged 70 and over. Bridging loan interest rates usually range between 0.45% - 2% per month, depending on the case and the market rate. Unlike mortgage interest rates, bridging loan interest is calculated monthly instead of yearly. This is because bridging loans are short-term and, in many cases, repaid within a year. Bridging loans can be arranged without early repayment penalties, so interest is calculated monthly to ensure you only pay interest on the months you have the loan for. No high street banks currently offer bridging loans. Instead, bridging loans are provided by specialist short-term finance lenders. At Clifton Private Finance, we are a whole of market brokerage that deals with multiple bridging loan lenders, and we act as an intermediary between clients and the lender ensuring the process is smooth and hassle-free, and making sure our clients are getting a good deal. Banks typically charge two main fees when taking out a bridging loan – arrangement fees and interest. But there are other costs to consider such as valuation fees, broker fees and administration fees. Costs can vary from lender to lender, and will also depend on what your bridging loan is for (e.g., residential or commercial purposes.) Arrangement fees are what the lender charges you to take out the loan and can range between 1.5 - 3% of your overall loan. Bridging loan interest, on the other hand, is calculated monthly. This can catch borrowers out who may be expecting an Annual Percentage Rate (APR) like with a mortgage. You cannot turn a bridging loan into a mortgage, but you can repay a bridging loan with a mortgage and effectively refinance it into a long-term arrangement. This is common when buying an unmortgageable property with a bridging loan, carrying out refurbishments, and then mortgaging it once it is wind and water-tight and a new valuation has been carried out. This is also common for properties bought at auction where a mortgage would be too slow to arrange, and so a bridging loan is used which is then replaced with a mortgage later. Yes, bridging loans are typically more expensive than mortgages. Bridging loan interest rates can be much higher than a mortgage, and are calculated and displayed as monthly rates instead of the usual annual percentage rate (APR) that you’ll see on a mortgage. However, bridging loans are a short-term solution, and you’ll only pay interest on the months you’ve borrowed money for – and you can repay early without any charges (for most loans). There are many circumstances where bridging loans are an affordable option and a means to an end - for borrowers that need to finance a property purchase quickly, it may be the only option available. If there is a purchase involved, bridging loans are paid from the lender to the lender’s solicitor, then to the client’s solicitor, and then to the seller’s solicitor - so, you as a client will not see the funds in your own account - similar to a mortgage. If there is no purchase involved (for example, for a bridging loan for home improvements before selling), the funds go from the lender to the lender's solicitor, to the client’s solicitor, and then to the client's bank account. In terms of how bridging loans are repaid by you, they are repaid as a lump sum, either at the end of your term or during it. You can choose to either 'service' the interest, so pay the interest back monthly, or roll it up into the value of the loan to also pay this off as a lump sum along with the capital. In most cases, a bridging loan will require a minimum deposit of 25%. However, the minimum can vary depending on the lender and the specific circumstances of the loan itself. Generally, bridging loans are secured against a property or other valuable assets, and the deposit required is often expressed as a percentage of the property's value, known as the loan-to-value ratio. In some cases, 0% deposit bridging loans are an option, but only if you have other property or assets in the background to provide additional security. You do not pay monthly instalments towards the capital loan of your bridging loan. Some bridging loans require you to repay the interest accrued each month, but most lenders will actually give you the option to roll this up into the loan value, meaning you repay it with your lump sum at the end and have absolutely no monthly commitments. It's worth noting that as soon as you pay off most bridging loans, you stop accruing interest - so, the quicker you pay it off, the less expensive it will be, and there are typically no ERCs (early repayment charges). Bridging loans can be arranged in as little as 7 working days. However, it depends on the complexity of the bridge loan and your specific circumstances. It may also be more expensive for you to rush an urgent application through – but not impossible. Bridging loans are a popular option for borrowers who are under time constraints, such as buying a property at auction or breaking a chain. The key factors lenders tend to consider are: Security - Bridging finance is usually secured against property or other valuable assets. Lenders will assess the value and marketability of your security. Exit Strategy - Lenders will want to understand how you plan to repay your bridging loan. In most cases, this is selling your old property, selling the new property (flipping), or refinancing with a long-term mortgage. Loan-to-Value (LTV) Ratio - Lenders consider the loan amount compared to the value of the property being used as security as a percentage. The LTV ratio can vary, but most lenders will have a maximum of 60-80% LTV. Remember, the criteria for obtaining bridging finance in the UK can vary depending on the lender and your circumstances.
What are net vs gross bridging loan calculations?
Which calculation do lenders use for bridging loans?
What is the difference between first-charge and second-charge bridging loans?
Can you get a bridging loan with bad credit?
How short-term are bridging loans?
What are bridging loan exit strategies?
What are some alternatives to bridging loans?
Is there an age limit on bridging loans?
Are bridging loans regulated?
Do you need a valuation for a bridging loan?
How much can you borrow with bridging finance?
Do you need a deposit for a bridging loan?
Can I get 100% bridging finance?
Does a bridging loan make you a cash buyer?
What is the longest bridging loan term?
Can I use a bridging loan to pay stamp duty?
Are bridging loans safe?
Can an 80 year old get a bridging loan?
What is the monthly interest rate on a bridging loan?
Do banks still do bridging loans?
How much do banks charge for bridging loans?
Can you turn a bridging loan into a mortgage?
Is a bridging loan more expensive than a mortgage?
How are bridging loans paid?
What is the minimum deposit for a bridging loan?
Do you pay monthly payments on a bridging loan?
How long does it take for a bridging loan to come through?
What is the criteria for bridging finance?
