Bridging loan alternatives

sue.robins_2

Hi, pls can someone help we’ve just had an offer accepted on a property that was with an auction company.  However we made the bid after the bidding had closed and the vendor was about to pull it. 

We can only get a mortgage for £220k and we offered £245k for the property. We have been advised that we need a bridging loan as the property is currently 3 apartments that we need to convert back into a family home. We have £60k deposit but we need to use £10290 of that ok the auction fee and £6k on stamp duty due to us both owing other properties that we are currently in the process of getting rid of. 

The whole bridging loan sounds like a n expensive nightmare, does anyone know if we can put a deposit down on a bridging loan or/and if there is a cheaper alternative as it will only take us a couple of weeks to convert it back and no planning permission is required just need to change council tax bill back into one?! Help anyone pls!! 

hazyjo

So you only need to use 25k for your deposit? Plus the auction fee and stamp duty?

Are you talking about a bridging loan to do the works then? Surely that's just a standard loan? Are you sure the lender fully understands what you're planning on doing with as I'd have thought one property would be worth substantially less than 3 flats.

AFF8879

You say you bought it from an auction company after the bidding closed - does that mean you have already exchanged contracts like in a normal auction scenario, or could you still theoretically pull out without losing your deposit? If the former, why did you agree to exchange without finance in place?

There’s not a huge amount of wiggle room if you’ve exchanged; you could potentially look into a development finance loan which might be a bit cheaper than a bridging loan but would only cover the costs of converting the three flats into one house and many lenders have high minimum borrowing amounts 

RAS

Possibly try the Ecology Building Society? They fund in stages.

sue.robins_2

No nothing has been exchanged at all our bid was just accepted on Thursday. We have a mortgage in principle in place, we don’t need a lot to convert it, just a matter of ripping out a couple of kitchens and installing a couple of false walls between bedrooms which my other half can do. We could still pull out without losing anything but we’re just looking at alternatives cheaper than a bridging loan which we don’t really need but have to Bcos it’s still classed as 3 flats although the local council cannot clarify if they are or not!! Only the council tax bills suggest that 

Thrugelmir

sue.robins_2 said:

We have been advised that we need a bridging loan as the property is currently 3 apartments that we need to convert back into a family home. 

You may well struggle to obtain a residential mortgage before the conversion work is completed. 

lesalanos

Fingers crossed your mortgage goes through OK and on time.  Looking from the outside with no info I would be very nervous about fulfilling all of their needs in time, assuming you have the standard 28 days to complete

[Deleted User]

Another way to do this would be to use a renovation mortgage (type of self build).  That would assume that the end result of 1 home is worth more than 3 separate flats.    Once the work has been done you would then remortgage to a conventional high street lender.

Bridging loan is probably quicker but as you found out, not very cheap

sue.robins_2

lesalanos said:

Fingers crossed your mortgage goes through OK and on time.  Looking from the outside with no info I would be very nervous about fulfilling all of their needs in time, assuming you have the standard 28 days to complete

We have 56 days plus more due to the demand at the moment and everything taking a little bit longer but I’m still quite nervous! Thank you!

eddddy

Just to make sure - reading through all the details you've given...

It sounds like it was a 'conditional auction' (sometimes called 'The Modern Method of Auction').


Typically, that means the £10,290 you've paid to the auctioneer is a reservation fee. So if you can't get a mortgage (or other finance), and you can't proceed, you would normally lose that £10,290.

If that's not your understanding, maybe clarify that with the auctioneer.


(Even though you offered/bid after the auction ended, the fact you paid a £10,290 fee to the auctioneer makes it sound like you are buying on auction terms.)


If it's a choice of "expensive bridging loan" vs "losing £10k reservation fee" - maybe the "expensive bridging loan" is worth considering.

Dal_Whinnie

I am slightly puzzled since you say that you can get a mortgage of £220,000 and have £60,000 deposit available giving you a total of £280,000. Isn't this enough to cover the purchase price and fees  which come to just over £160k?