Bridging loan for auction property

cazmanian_minx

Are there any bridging companies who'll do a loan for an uninhabitable property (it's derelict)? We need to borrow 55% of the hammer price until we can get planning permission for restoration which will allow us to get a mortgage (verbal approval of our plans has been given by the local planning officer and the building society in question).

(Excuse me while I do a little :j:j:j:j:j:j:j:j:j - this is a building we nearly bought through normal channels 5 years ago, got gazumped on and never thought we'd ever get another crack at it!)

CapJ

cazmanian_minx wrote: »

Are there any bridging companies who'll do a loan for an uninhabitable property (it's derelict)? We need to borrow 55% of the hammer price until we can get planning permission for restoration which will allow us to get a mortgage (verbal approval of our plans has been given by the local planning officer and the building society in question).

(Excuse me while I do a little :j:j:j:j:j:j:j:j:j - this is a building we nearly bought through normal channels 5 years ago, got gazumped on and never thought we'd ever get another crack at it!)

It doesn't seem likely and would be horrendously expensive. Look at it from the lender's point of view:

This is high risk - if you don't get planning approval the site could actually be worth a negative amount (due to demolition costs). Verbal approval is essentially worth nothing.

On the flip side there is little return for the lender as you don't want the loan for long so not much time to charge interest.

Really you would be better off:

Getting a mortgage not a bridging loan (also difficult).

Getting an unsecured loan to buy it initially.

Be aware that almost no bank or building society will give a mortgage on a property after it has been bought, if it was bought less than 6 months ago.

Yorkie1

I don't know the answer to your question, but it sounds very risky to me. You will be taking on a costly short-term loan based only on verbal promises which may not eventually come good.

What happens if the B Soc doesn't eventually make an offer, or it's at a much lesser amount than you hope for? Does it know that the house is uninhabitable - usually that makes a property unmortgeable. Or if the PP takes much longer to be considered because there are objections / it's refused and you have to appeal etc?

Thrugelmir

Yorkie1 wrote: »

Does it know that the house is uninhabitable - usually that makes a property unmortgeable.

For normal funding channels yes. Sounds like a sell up and live in a caravan project in order to raise the funding.

cazmanian_minx

Thanks all, very helpful.

The one thing I can guarantee is that it won't be demolished - it's listed and the planning officer and the listed buildings officer are both extremely keen to see it brought back into use. We'll look down the unsecured loan route instead.

Yorkie1

Make sure you have a very decent contingency fund. Listed properties often have hidden nasty surprises, with remedial work having to be done using traditional methods and/or materials - all at extra expense and, potentially, delay while you seek the listing officer's consent at many stages.

kingstreet

Last time we got a thread like this, I suggested Tiuta and the OP did some research and found the cost was prohibitive.

I echo the other comment about how you deal with being unable to remortgage if something goes wrong and would ask you to note you'll have to stick with the bridging finance for around eight months as you won't be able to apply for the remortgage until you've owned the property for six.

Caution needed.

cazmanian_minx

Thanks kingstreet. Assuming a bridging loan rate of 1.5% a month, it's comfortably affordable.

We've decided to go and have a look at it and see what the current owners have done. They've replaced the roof which is concerning for two reasons: 1) there's nothing on the ePlanning system to state they had planning permission or listed buildings consent to do so and 2) the full structural survey we had done five years ago stated that most of the roof beams were rotting where they sat on the building's walls. If they've just put the tiles back on and not replaced the beams, the whole lot will have to come off and be redone, at which point we walk away until it comes down to the price we originally offered 5 years ago (which we could raise in cash).

SouthCoast

The major property auction houses carry relevant ads in their auction catalogues.

Conrad

Bridging is only possible where the lender believes you will live elsewhere. They cannot lend on a property you will be living in as this then falls into FSA regulation, which bridging is excluded from.

An alternate to bridging is a non status mortgage, but the lender will still need to survey the property and carry out the nusual due dilligence to include full legal conveyancing and checks.

The reason most aution deals are cash is that lending is NEVER guaranteed and can fall through at the mast moment, meaning the applicant looses the property and thier 10% deposit.
You'll need a good deal of luck to get this through using lending. Also bridgers usualy want a clearly defined exit route, and it wont be sufficient to say a remortgage should be possible subject to all manner of property repairs (what if you fall ill / go mad / get depressed part way into the renovation for example).