Bridging finance?

Doozergirl

The in laws have been tentatively looking for a bungalow forever. They are very fussy but before they went on holiday they spotted a bungalow which they thought would be ideal if it ever came up for sale.

Cue the day they get back from holiday and there is a for sale sign up outside. We've been today to see it and they are in love. They are both now 70ish, own their house outright, another house in the UK which they let out. Combined they are worth around £380,000. They have money, some accessible, most locked away in savings and investments which come with penalties.

What they want to do is buy the bungalow outright and without selling their own house immediately as it needs work before they would want to move in. The price will be around £190,000.

I'm looking to see if I can finance it through my own property business but I think we will have to add them as directors in order for them to be able to buy the property in their names and not our company's. They would of course want it in their own names.

Anyway, I'm rambling. The question I'd love answering is how we best bridge the gap. A quick chat with the mortgage consultant at 'the bank' suggests they need a repayment mortgage to be repayed by the time they are 75 but puts the repayments at £4000 a month! There will be more than enough money to cover it within around six months.

Any ideas please guys?

Senior_Paper_Monitor

My first comment - you did not speak to a 'mortage consultant' at the bank - you spoke to a bank sales person. As demonstrated by the daft solution offered!

Lots of ways to (sensibly) finance what you describe - find an independent/whole of market mortage broker (its my no means a stanadrd job but well within the scope of any half decent broker).

Thrugelmir

Suffer the penalities to access the cash.

Any form of bridging finance will be expensive.

How are you proposing to fund the purchase through your own Company? Not necessarily straightforward.

Doozergirl

I'm pretty experienced at buying property through my own company. I know how much that will cost but this is not property for our company and I'm not sure about making them directors. I don't want them thinking they're suddenly responsible for all of our business borrowing.

The mortgage broker I want to talk to is on holiday until next week. What I would like is a rough idea of costs. bridging vs. remortgaging vs business loan. I don't think that there is quite enough to cover with the investments anyway or they'd be wiping themselves out on the cash side completely; there will need to be some kind of loan.

No one has any specific suggestions of how to do it?

Senior_Paper_Monitor

To give "specific suggestions" (i.e advice) it takes specific information - we do not have the information and this frankly is not the forum for specific advice, just general guidelines (at least my opinion).

I suspect that an interest only offset may be the best vehicle (not sure which property would be the one to place it on though) but this is pure supposition without much more detailed information about your parent's financial affairs, which I suspect you don't want to publish here, I do not intend to have a further guess. There are many options.

Frankly I don't understand the purpose of 1) financing through your company 2) making them directors, nor the thought that would 'they not be responsible for the company's actions' (they would, I agree, not necessarily be responsible immediately for specific debts guaranteed by other directors) ... and I have been a director of more than half a dozen companies - both executive and non-executive, as welll as large and small.

Bridging (in its true sense - as indicated by the name) should be very short term if it is to be effective. Commercial finance might be a possibility. Offset and shared ownership structures have possibilities. Anyone who claims to know the best way to select from those without very detailed personal info is bluffing.

silvercar

Is there a reason why your company couldn't make a loan to the in-laws? No need to buy the property in the company's name, let the company give a repayable loan to the in-laws. The current owners (directors) of the company just need to agree the terms.

Failing that you could look at an open ended bridging loan, open ended because you don't have a completion date for the sale of their home.

Another option would be to take a mortgage on the new property, with no or low early redemption penalties.

Thrugelmir

Doozergirl wrote: »

No one has any specific suggestions of how to do it?

Making what should be a simple transaction extremely complex. Creates unneccessary pitfalls and will add expense.

As SPM says without very detailed information in this instance. Its not possible to work out the feasability of any given option.

Doozergirl

Yes I know it will add expense, and yes I know it makes something simple more complex, but they want the house and they've asked us to help them get it and at their time of life, if they want this house, then I will do especially as they have more than enough assets to cover it, but not enough liquid. This is the forever house after about four years of viewing bungalows I'm not about to let it slip from them in an area where bungalows don't stay on the market long at all. It's their own bloodymindedness that puts us in this situation, but there we go.

It may not be 'bridging finance' in the literal, and when I said sepcific I meant some specific ideas of "options"; methods based on the hypothetical scenario, not formal advice. If some of those aren't feasible then fair enough but I am looking for pointers. I thought that some people might know how those of the 'third age' can raise a loan at a sensible price for a period of six months or so.

Some people have provided pointers for me, so thanks. Some managed it without patronising me. I'll take a leaf from that book when I wander back to the House Buying board now and stay there.

:beer:

Thrugelmir

Doozergirl wrote: »

I thought that some people might know how those of the 'third age' can raise a loan at a sensible price for a period of six months or so.

Some people have provided pointers for me, so thanks. Some managed it without patronising me. I'll take a leaf from that book when I wander back to the House Buying board now and stay there.

:beer:

Finance is finance. This isn't the 3rd age more a return to the 1st age.

Bridging loan finance will cost 1% a month or more. A suitable security will need to be put up for the facility, ie another property. On which they'll advance around 75%.

Why not sell the existing property as is?

Always welcome back here. :beer:

Jackinbox99

Thrugelmir wrote: »

Why not sell the existing property as is?

Always welcome back here. :beer:

My guess is because it will be worth a lot more when done up, and secondly the sellers of the other house may not be prepared to wait until her parents property sells.

I am in a similar situation atm, looking for options to buy another property and it boils down to 3 choices. Get a mortgage, get a bridging loan, or sell current house to fund new purchase.

Thrugelmir

Jackinbox99 wrote: »

My guess is because it will be worth a lot more when done up, and secondly the sellers of the other house may not be prepared to wait until her parents property sells.

I am in a similar situation atm, looking for options to buy another property and it boils down to 3 choices. Get a mortgage, get a bridging loan, or sell current house to fund new purchase.

Then I would ask. Why isn't the property ready to sell and the funds placed in accessible accounts. If the search has been on for 4 years. Not a criticism as don't know actual circumstances but an observation. As obviously there will lots of interest in the property and being able to move quickly is the key.