Navigating the Financial Maze of Downsizing in Retirement: What are Bridging Loans?

Jan 29, 2024

Retirement often marks a period of transition, a time to embrace new experiences and simplify life. Many retirees consider downsizing their homes, seeking a smaller, more manageable living space that aligns with their changing needs and lifestyle. However, the financial aspect of downsizing can be logistically difficult to achieve, especially when coordinating the sale of your existing home with the purchase of a new one. This is where bridging loans can come into play.

A bridging loan is a short-term loan secured against the property, your current property, or both. It provides you with the financial flexibility to purchase a new home before your current one has sold. This can be particularly advantageous for retirees who have found their dream retirement home but cannot afford to wait for their current property to sell.

What are the benefits of using a bridging loan for downsizing:

  • Flexibility and Speed: Bridging loans allow you to move on your own timeline, without the pressure of a tight chain of transactions that rely on other buyers and sellers. You can secure your new home and move in, while your current property finds a buyer at a suitable price.
  • Stronger Purchasing Position: Acting almost as if you were a cash buyer with a bridging loan can strengthen your position in the property market. You can make competitive offers and move quickly, increasing your chances of securing your desired retirement home.
  • Stress Reduction: Downsizing can be challenging emotionally and financially. Bridging loans can alleviate the stress of coordinating timelines and provide a sense of security during the transition.

What do we need to consider before using a bridging loan:

  • Cost: Bridging loans are far more expensive than mortgages. Rates are typically anywhere between 0.5% to 1.5% per month. As the interest is added to the loan, this also compounds, meaning further interest. Lenders charge arrangement fees too, which are typically 2% of the amount borrowed.
  • The Exit: Bridging loans are typically short-term loans, often lasting up to 12 months. It’s crucial to have a clear plan for selling your existing property, refinancing to a mortgage, or selling other assets within this timeframe to ensure the debt is fully cleared. Whilst no one can predict the future or guarantee you will be able to exit a bridge, never, ever enter into a bridging loan without the exit being as assessed as much as you reasonable can, beforehand.
  • Repossession: Bridging lenders assess your ability to repay the loan, on the equity in the property and how comfortably they can get their money back if they have to repossess you. Once the bridging term (e.g. 12 months) has finished they can and often will start repossession procedures against you, so you need to be prepared for this risk. Some lenders will grant a 6 month extension, but you must bear in mind that this is a short term arrangement, hence the name ‘bridge’.
  • Impartial advice: Our advice is always to seek advice from a mortgage broker, rather than a bridging specialist in the first instance. There could be other ways to achieve the desired outcome, without the risk or expense of a bridging loan. A bridging loan should always be a ‘needs must’ product rather than a ‘plan a’.

Additional tips for downsizing in retirement:

  • Start researching potential retirement homes early and consider your lifestyle preferences, accessibility needs, and budget.
  • Declutter and organize your belongings before moving to minimize the stress of packing and unpacking. Consider donating or selling items you no longer need.
  • Involve family and friends in the downsizing process, and don’t hesitate to seek professional help if needed.
  • Downsizing in retirement can be a rewarding experience, allowing you to embrace a simpler, more manageable lifestyle. Bridging loans can provide the financial flexibility and peace of mind you need to make this transition smoothly. Carefully consider your financial situation, seek professional guidance, and make informed decisions to ensure a successful downsizing journey in retirement.
  • Get advice. Bridging loans can be fantastic tools to achieve a purchase, which simply wouldn’t have been possible without one. However, there may well be simpler, safer and cheaper ways to buy your dream home, without the risk and expense of a bridging loan.Get in contact with us or book an initial consultation to see how we can help you secure a mortgage.

Steven Morris – Advising Director



Steve loves a complex mortgage. Most recently he has used his technical geekery to work his way up through Which? Mortgage Advisers, progressing to Senior Adviser and then Onboarding Manager. There, he was responsible for hiring, training and managing new advisers.

He also ran the monthly new starter inductions and wrote and maintained the telephony advice standards of the company. Outside of work Steve can be found coaching and being run ragged by his local under 10’s rugby team, Bristol Harlequins RFC.

Meet the rest of the Advantage Team

Cracking the Ladder: A Guide for First-Time Buyers in the UK

The dream of homeownership burns bright for many, but navigating the UK property market can feel like a daunting climb. At Advantage FS many of our first time buyer clients start their journey believing or being told the mountain is too steep. However, with the right...

Why a Local Mortgage Advisor Makes All the Difference for Your Bristol Home Journey

Congratulations! You've decided to take the exciting (and sometimes daunting) step of buying a home in Bristol or the surrounding area. Whether you're a first-time buyer eager to step onto the property ladder or a seasoned mover looking for your next dream home,...

Are mortgage rates in the UK going up or coming down 2024

I thought mortgage rates were coming down in 2024, what is happening?  Let’s get a misconception out of the way early about how mortgage rates have been changing… Mortgage rates available during January 2024 were cheaper than anything else we have seen since. For...

Homeownership Made (Slightly) Easier: The New £5k Deposit Mortgage

Surprise news for first-time buyers!  Accord Mortgages and Yorkshire Building Society have launched a brand new mortgage product that lets you step onto the property ladder with a deposit of just £5,000. That's right, you can finally ditch the housemate and snag your...

UK Mortgage Rollercoaster: Rates Tumble, Yet House Prices Remain a Challenge (April 6, 2024)

MARKET WATCH! UK Mortgage Rollercoaster: Rates Tumble, Yet House Prices Remain a Challenge (April 6, 2024) This week in UK mortgages has been a tale of two trends: good news for potential borrowers with falling rates, and lingering concerns for some facing a tough...

UK Mortgage Rates: A Quick Look at the Last Week (as of March 24th, 2024)

MARKET WATCH!  UK Mortgage Rates: A Quick Look at the Last Week (as of March 24th, 2024) This week in the UK mortgage market (as of March 24, 2024), we've seen a relative pause after several weeks of steady increases in interest rates. The Bank of England (BoE)...

Help! I’m a Birmingham Midshires Residential Mortgage Customer

Birmingham Midshires Exited Direct Mortgage Market in 2011: What Existing Customers Need to Know  Important information for Birmingham Midshires mortgage holders: As of October 1, 2011, Birmingham Midshires made a significant change – they stopped offering...

February 26th 2024 mortgage news

Halifax buck the trend In a surprising move, Halifax, the UK's biggest mortgage lender, has cut its mortgage rates, going against the recent trend of lenders raising theirs. This move is seen as an attempt by Halifax to gain market share in the competitive mortgage...

February 14th 2024 mortgage news

What's in the news? February 2024   The cost of moving and stamp duty is putting millions of homeowners off of potentially downsizing. Older homeowners are unable to move to smaller properties because of the financial burden that comes with a house move, and this...

Mortgage rates are falling in the UK as lenders battle for business in 2024

After a gruelling two years of rising interest rates, the UK mortgage market is now seeing a price war as lenders compete for business. This is good news for borrowers, who are now finally seeing rates fall. Halifax, one of the country's biggest mortgage lenders, has...

Celebrating more 5-star reviews than any other independent broker in Bristol!

Contact us today to find out why we've received over 400 hundred 5-star Google reviews

You have Successfully Subscribed!