Bridging Loan from parent

evelyn13

Hello,

I was just wondering how mortgage companies will view a bridging loan from a parent? This would be paid back following the sale of my own property. The bridging 'loan' would be £180,000 and the mortgage I would need would be £40,000 (this would be my first mortgage).

dimbo61

You would need to speak to a solicitor.
Lenders do not like LOANS being used for a deposit ( small or in your case BIG)
How do you pay back the LOAN and pay the mortgage?
Have you not got a deposit saved up yourself ?
How are you going to pay a mortgage and a Loan? What interest rate is Mum/Dad/Uncle Tom going to charge ( Will they be declaring this Income to the TAXMAN HMRC)
The Big buzz word is now affordability !!!!!

lztom

Hi evelyn13,

I'm a long time lurker but thought I'd sign up to reply as I'm in the exact same situation at the moment and a bit further through the process.

The bank were absolutely fine with it, and I would expect yours will be familiar with this type of arrangement. All my parents needed to do was write a letter explaining that they are loaning the money and that they want no part of the property in return etc. My parents' bank is the same as the one that we are getting the mortgage with. If not, I guess they may require some further proof of funds, and other parties may want further proof. For example, the estate agent required us to show actual bank statements demonstrating the proof of funds.

I hope that helps, and best of luck with your house purchase.

Thanks,

Tom.

Thrugelmir

Is your property sold subject to contract or merely on the market? The status could have a bearing on any outcome.

evelyn13

Thank you Tom, that was really helpful!

I guess my wording may have cause some confusion, it would be a loan, but with no interest and that loan would be paid back in full once my house (House A) has sold.

I'm looking to buy House B, by taking out a 40k mortgage and I would need to purchase this within the next 4 months, however I am unable to sell House A in time due to tenants being in the property. Therefore my parent offered to lend me £180,000 until House A has sold.

I hope this makes sense.

evelyn13

The property is on the market (rather than STC), which yes would be more of a concern.
My parent was going to buy it, however had it valued today and the property prices have risen drastically in our area meaning I will get an extra 20k for it. It is a property that should sell fairly quickly, it is well sought after (but you just never know!)

Wh05apk

This should not be too much of an issue, I assume your parents will not charge you anything monthly, simply being repaid at the end?


I am doing something similar for a client who actually has a wealthy friend helping him, lender was fine with it.

evelyn13

Yes, no monthly charge at all.
I would repay her once my current house has sold.

Do you know if there were any tax implications for the friend who lent the money (what a kind friend!!)