bridging loan

Wig

Going to buy a house at auction, and I may need a small fast cheap bridging loan.

I will probably need to borrow anywhere from 10 - 30k

I need it as cheap as possible, as fast as possible, and able to repay it without any penalties within a few months (once the house is purchased we will remortgage it - so I'm assuming the mortgage will be the cheapest way to borrow esp ING @ 5.14%).

The auction catalog has adverts from companies specialisng in auction bridging loans, the most prominent is https://www.tiutaplc.com so I will be considering them. But I have yet to see what they can offer.

Where is the best place to get a cheap loan these days? High street bank/society?

We have 1 house in the middle of renovation (mortgage free) to act as collateral if needed, current value around 80K, finished value around 120K. If this house is needed as collateral, what will the process involve? i.e. will they need to value it or inspect it? or see the title documents?

Thanks

jonesMUFCforever

For a bank to consider it you will need to offer security (and this must be in place before they loan you the money) and expect to pay around 1 or 2% arrangement fee plus interest of around base rate +1% on a closed bridging loan or 2 to 3% on an open bridge loan.

Wig

What's a closed loan - you mean the term of the loan is fixed?

What does "in place" mean, what does the process involve? How long does it take to set up?

Thanks

jonesMUFCforever

A closed bridge is where you have already exchanged contracts or in your case have a written offer of a mortgage to cover your new property. ie there is a definite end to the loan as opposed to an open bridge where it could go on indefinetly.
You will not have a charge registered by your bank by next week - so it will depend on what your bank manager thinks of you whether you will have access to funds in time.
You are right in saying that they will want to value the property before giving you a loan on it. Will this be possible - again they might not be able to fit it in before the auction.

Wig

Will I be paying back the interest only? And then at a time when I'm ready, (a few months) I repay the capital?

What if the loan is unsecured, does this make it more expensive?

What would you do?
*You own one property mid renovation - value at least 70K
*You intend to buy another - in reasonable to good condition on Thursday
*Auction Property valued about 95K (actual value, not guide price)
*Cash available upto 80K
*I also have 5k available as a credit limit on a credit card - 27.9% annual cash rate! So I would only touch that in an extreme emergency.

What's the best way of making up the possible 10 - 20K shortfall quickly?

I can prepare the loan on Mon, Tue & Wed, but may or may not need it after Thursday, If I do need it I will need it within 14 days, the sooner the better.

jonesMUFCforever

Well you could ask your bank for a £25k Personal loan (that's the limit for unsecured lending) if you are a good customer you should get a rate of about 6 or 7%. Downside is that you will probably have to pay 2 months early settlement fee when you come to repay. This should be still cheaper than getting a bridge. You will also have to make repayment of capital and interest on this type of loan unless they can do you a buy now pay later loan.

I have never attempted to buy a house at auction but is the case that you have to pay the whole amount on the day of the auction or merely 10% deposit?
If only a deposit is required wil you not be ok giving you say a month or so to complete the finance needed to complete.

Wig

I have to pay 10% deposit on the day. Depends on different auctions then how long you have to complete, some give 30 days, some 20 days, but the one I am buying from gives 14 days. Not enough time for a regular mortgage.

I'll talk to the banks tomorrow.

Thanks

jonesMUFCforever

Tread carefully as can you do the searches and other legal work in 14 days?
Never mind the mortgage I would want to make sure that there is no outstanding mortage on property and that i would be getting a good title when buying.
Personally I would not be rushed - is 14 days common??

JoeK_3

Your situation is the classic case of a property developer. When you buy at an auction a 10% deposit is taken and exchange of contracts takes place on the day, so technically you are the legal owner. If you do not pay the balance within the time agreed which incidentally is usually 28 days, you lose the deposit.

You should instruct your solicitor to check out the property in question before the sale to ensure that it is free from all the usual things like planning changes, mining etc.

Bridging loans are not cheap and range from 0.75% per month but the maximum loan that you can obtain on the property is 75% of the value.

Do you have that amount of money?

JoeK

Wig

I intend to get the legal pack tomorrow, and pass it to a solicitor same day. As the property is being sold by the mortgage lender in posession (reposession) I don't think there will be any hiccups, but I will see what the solicitor says tomorrow, (the solicitor specialises in auction properties so they should know their stuff.). I will also be talking to the auctioneers tomorrow to see what they say about the risks involved - if any.

I'd prefer a buy now pay later loan. Is this something they do as standard or do I have to ask for special terms?

I used the terminolgy in google and found Lloyds gives BNPL loans for internet banking customers (that includes me). They give 4 months payment holiday (should be enough) before the payments begin, and if I repay early I get charged 58days interest upto a maximum of £250 (sounds good).

If you repay the whole loan early, you must also pay us an administration fee when you make the repayment. This will be equal to 58 days’ interest under this agreement, up to a maximum of £250 calculated on a daily basis on the outstanding balance on the loan account.

However, if you ask for a quotation within 30 days of the loan being opened and repay all sums due by the settlement date given in the quotation, the administration fee will be just £1. And there will be no administration charge if you ask for a quotation within 90 days of when the final monthly repayment would fall due (as assessed at the quotation date).

I don't fully understand what they mean by the last paragraph?

JoeK_3

Can you pay the 25% out of you own pocket now???

The bridging loan company will only go to a maximum of 75% of the property value, when they value it. This is not the value of the property that you buy it for.

On top of this, you may want to spend on it to bring it up to retail value.

JoeK