Wary of buyer with bridging loan?

rickyroma

Got an offer on our house from someone with a bridging loan. Their property is for sale but not under offer yet. I admit I didn't even know what a bridging loan was until this week! 

 We are a bit under pressure to accept an offer in the next couple of weeks otherwise we lose the house we are hoping to buy. 

 Are we worrying too much about taking our house off the market for someone with a bridging loan? Our concern is that they will realise this type of finance is not the best way to go and pull out. 

Any thoughts? 

moneysavinghero

It could be an indication of how serious they are about buying if they are willing to take on a bridging loan to get your property. Anyone can pull out of a property transaction, bridging loan or not.

eddddy

Have they actually got a bridging loan offer?

Often people think "I've got a really good idea... I'll get a bridging loan!" But when they find out the costs, risks, and t&cs, they change their minds.

So perhaps your EA needs to see some paperwork from the buyer that confirms they've been offered a bridging loan. (Or maybe you think about leaving the property on the market until they have a firm offer of a bridging loan.)

sgun

We were told by three main lenders that they don't offer mortgages when bridging loans are involved. Just something else to be aware of if your buyers need a mortgage too.

K_S

rickyroma said:

Got an offer on our house from someone with a bridging loan. Their property is for sale but not under offer yet. I admit I didn't even know what a bridging loan was until this week! 

 We are a bit under pressure to accept an offer in the next couple of weeks otherwise we lose the house we are hoping to buy. 

 Are we worrying too much about taking our house off the market for someone with a bridging loan? Our concern is that they will realise this type of finance is not the best way to go and pull out. 

Any thoughts? 

@rickyroma In principle, someone with a bridging loan is far more proceedable than one relying on a normal residential mortgage. And the use of chain-break bridging loans are far more common than most people realise.

But as the poster above mentioned, do ask the EA to make sure that they have sight of something which confirms the arrangement. Not all bridging loan providers issue an AIP so the buyer may not necessarily have one to show. However, they should be able to show something to prove that they've applied for a loan or got a quote from a bridging loan broker.

rickyroma

They made the offer but we made it clear we need to see some sort of proof their finances are in place before we accept the offer and take it off the market. The buyer said they need their offer accepting before they are able to finalise the bridging loan offer ( does this ring true?) . So we are stuck in this catch 22 position at the moment.
We have told our EA to pin the buyer down a bit more on their situation 

K_S

@rickyroma They can get an AIP from a bridging lender who issues one. Or get an email sent to the EA from their bridging broker confirming that their finances are in place. If I were in your place, I'd be happy with that.

You wouldn't apply for a residential mortgage before the seller accepted your offer, and the same logic stands for a bridging loan. As a broker I wouldn't process a bridging application without an offer being accepted.

saajan_12

rickyroma said:

They made the offer but we made it clear we need to see some sort of proof their finances are in place before we accept the offer and take it off the market. The buyer said they need their offer accepting before they are able to finalise the bridging loan offer ( does this ring true?) . So we are stuck in this catch 22 position at the moment.
We have told our EA to pin the buyer down a bit more on their situation 

You could ask for
* size their deposit is & proof of funds (eg bank statement)
* Quote from broker, stating criteria and amount they can borrow
* proof they meet the criteria or confirmation from their the broker that they do (eg income criteria)

neilogg

Not having moved house in 40 years I was amazed to discover that the banks and building societies I deal with do not offer short term bridging loans at reasonable rates.

It is a clearly a major logistic advantage to be able to decouple the move to a new property from the clearance of an existing house. Any lender could have the security of the deeds on the existing house between exchange and completion when the loan would be paid off. The alternatives of synchronising both moves or renting/storage are not appealing.

There are apparently, large amounts of money around available at low interest rates. Why is this all so difficult and why don 't the banks/building societies offer this service?

pinkteapot

How much do you need a quick sale? While they’re prepared to go ahead with a bridging loan, my worry would be that 2 months in they get an offer on their house and decide to make it a chain instead which would delay things. 

K_S

neilogg said:

Not having moved house in 40 years I was amazed to discover that the banks and building societies I deal with do not offer short term bridging loans at reasonable rates.

It is a clearly a major logistic advantage to be able to decouple the move to a new property from the clearance of an existing house. Any lender could have the security of the deeds on the existing house between exchange and completion when the loan would be paid off. The alternatives of synchronising both moves or renting/storage are not appealing.

There are apparently, large amounts of money around available at low interest rates. Why is this all so difficult and why don 't the banks/building societies offer this service?

@neilogg Depends on what you consider to be a "reasonable" rate taking into account the fact that it's an entirely different kettle of fish compared to mainstream residential mortgages. 

I arrange a good amount of bridging finance (both the regulated and unregulated kind) and can confidently say that it's a very competitive industry in the UK with a wide set of lenders servicing pretty much every scenario there is that requires short term property backed finance.

Are the rates and fees comparable to long term resi rates, definitely not. Are they competitive for what they are providing, (imho) definitely yes.