Beating Stamp Duty Deadlines with Bridging Finance

Beating Stamp Duty Deadlines With Bridging Finance

It remains to be seen whether the government decides to extend the stamp duty suspension deadline beyond March 31 next year. In the meantime, short-term loans like bridging finance could help movers and buyers make the most of the temporary stamp duty holiday.

COVID-19 has had a major impact on all aspects of the housing market. On the High Street, major banks and lenders are processing applications and authorising mortgages much more slowly. Elsewhere, the property chain as a whole is moving at a sluggish pace, often compounded by disruptive bottlenecks.

All of which would be inconvenient at the best of times, though the main concern is with the stamp duty suspension deadline fast approaching. There’s still technically time to organise a home loan, but considering much faster and more accessible funding like bridging finance is nonetheless advisable.

The speed and simplicity of bridging finance

Bridging finance outpaces all traditional property loans and mortgages by a clear margin. Depending on your requirements and personal circumstances, the money you need to purchase a property could be yours within a matter of days.

Specialist lenders issue bridging loans almost exclusively on the basis of security, i.e., the value of your current home or any other qualifying assets you choose to use. If your security is considered viable and comfortably covers the costs of the loan, there’s every chance you’ll qualify and gain access to the money in no time.

By contrast, a conventional home loan or mortgage in the current climate could see you sitting around for days or even weeks, simply waiting for a final decision to be made.

As the government’s stamp duty suspension applies to properties with a market value below £500,000, it applies to approximately 90% of all residential property purchases. This in turn means that nine out of 10 buyers planning purchases between now and March could capitalise on the offer, saving an average of £4,500.

How bridging finance works

A bridging loan differs from a conventional mortgage in that repayment is required within a much shorter period of time. Whereas a mortgage may be repaid over the course of five to 35 years, bridging loans are almost always repaid within six to 18 months.

Interest on a bridging loan therefore applies on a monthly basis, often less than 0.5% with a competitive deal. The funds are made available within a matter of days, the property is purchased, and the loan is repaid in full at a later date when the borrower’s existing home sells.

Where used to leverage the government’s stamp duty suspension, bridging finance could prove particularly profitable. Sourced from a leading lender and repaid as quickly as possible, the subsequent £4,500 average stamp duty saving could cover several of the loan’s major borrowing costs.

For more information on the potential benefits of bridging loans or to discuss the mechanics of the temporary stamp duty holiday in more detail, consult with a member of the team at today.