A bridging loan?

tigger449

We want to buy a house that has room for our elderly parents. We've found an ideal house that is priced at £500,000. This house is perfect for our needs but we haven't sold our current house yet. Our current house is valued at £250,000 and we have a £25,000 mortgage. We also have £400,000 in cash from a recent inheritance. Would a bridging loan be the answer to avoid us missing this perfect house?

G_M

Bridging loans can be expensive (assuming you are able to get one).


And you have no idea when, or even if, you'll be able to pay it off.


It's high risk.

eddddy

Bridging loans can be very expensive. You see interest rates of 0.4% per month advertised, but you might end up being offered an interest rate of 1% or 1.5% per month.

Then the typical risks with bridging loans are...

• You might get much less than you expect for your current property - leaving you in financial difficulty

• You might end up with a very difficult sale for your current property that takes many months - e.g. because of problems in the chain below.

• And/or the first one or two sales of your current property might fall through - meaning you're paying bridging interest for a very long time

• You might even find that there is an unforeseen legal, search or structural problem with your current property, which needs time and money to sort out before you can sell.

Because you have the buffer of the large inheritance, perhaps you are less worried about these risks.

But it might be safer to consider marketing your current property at a 'bargain price', in order to get an offer quickly, and avoid a bridging loan.

Crashy_Time

Try to get a discount first IMO.

https://www.dailymail.co.uk/tvshowbiz/article-6990557/Rod-Stewart-loses-3-4m-finally-sells-Essex-mansion-footballer-course.html

jennifernil

tigger449 wrote: »

We want to buy a house that has room for our elderly parents. We've found an ideal house that is priced at £500,000. This house is perfect for our needs but we haven't sold our current house yet. Our current house is valued at £250,000 and we have a £25,000 mortgage. We also have £400,000 in cash from a recent inheritance. Would a bridging loan be the answer to avoid us missing this perfect house?

Could you use £25k of that £400k to repay the current mortgage?

Then use the remaining money, minus costs, as the deposit on the new house and take a mortgage for the rest?

You will need to budget initially for the extra stamp duty , but that can be reclaimed once you sell the present property.

Bridging loans are generally pretty expensive to arrange and the rates are high.

hazyjo

Search the forum for 'bridging loan' for lots of advice and horror story or two.

IMO they should be for short-term, fixed periods only.

letitbe90

I’d take out a mortgage for the new house for the difference instead and pay it off on sale of existing home. If the selling of the house doesn’t go as planned, the bridging loan can really destroy you financially - it has the added impact of making you desperate to sell and discount the house far more than you usually would just to sell it, exacerbating the loss of money.

AdrianC

You have £400k in cash.
You have a £250k property with £225k equity, which is for sale.
You want to buy a £500k property.

Seems like a no-brainer to me - no bridging loan needed.
Use £25k cash to pay off the mortgage on the sale property.
Get £125k mortgage for the purchase. Make sure it's one with low early-redemption fees.
On sale, clear mortgage, have £100k cash.

AnotherJoe

As a variant of Adrians approach see if you can get an increase on your existing mortgage of say £100k or so. It might be quicker to arrange.

DO NOT say it will be redeemed within a few months or you for sure wont get it.


Then you can buy with cash.

wmccole

I have sold two houses buyers just waiting  for funds to be issued ,i have bought new property but might have to complete before buyers get their funds issued

wmccole

What is the best thing to do?