Bridging Loan

Zacwhite

We are looking at moving house and have seen a property we are very keen on. However, someone else has an offer on it but cannot move forward until he has sold his property.
While we will also be selling our property, I am looking at obtaining short term finance ( possibly 1 year to allow sale of my home ) to ensure that I can get hold of this new property.
I would be looking at obtaining £130,000 which would cost a total of £142,000 after 12 months. We are seriously considering this but before we move forward, I would be interested to know if anyone has experience of such a Loan or would suggest an alternative means of financing this purchase ?

Many Thanks in anticipation..

Eamon

km1500

Have you even checked you can get it, as bridging loans are usually only available once contracts have been exchanged ie they are not open-ended

eddddy

As you probably realise, the big risk is that you have problems selling your  current property. For example....

• The property market tumbles, so you have to accept, say, £25k less than you expect  for your current property - will your finances still be ok? (How far could property prices tumble, before you're overstretched?)

• You find a buyer for your current property - but problems show up in survey or searches. e.g. suspected subsidence, somebody nearby makes a 'scary' planning application

• You end up with a buyer with a difficult chain beneath them - long delays, chain eventually breaks, you have to remarket. Maybe it happens 2 or 3 times

And will you eventually need a mortgage on the new property - to replace some of the bridging loan?

If so, there are added risks - like you lose your job during the 12 months, so can't a mortgage to replace the bridging loan.


(I assume you're not thinking that you can have a mortgage on your current house, plus a mortgage on the new house, plus a bridging loan - all at the same time. Or if you are, have you discussed affordability with the lenders?)

eddddy

km1500 said:

Have you even checked you can get it, as bridging loans are usually only available once contracts have been exchanged ie they are not open-ended

Lots of lenders advertise Open Bridging Loans (i.e. pre-exchange) as well as Closed Bridging Loans  (i.e. post-exchange). 

Are you saying that, in reality, Open Bridging Loans aren't really available?

AskAsk

my property is currently STC where the buyer is using the bridging loan to fund the purchase.  the estate agent had referred them to a broker and the idea is that they get the bridging loan and then as soon as they complete on my house, to get a buy to let mortgage on their house and pay off the loan, then gives them time to sell their house.  at least that is what the EA told me the broker had advised the buyers!

the buyers are cash rich as their house is more expensive than mine, without mortgage.  they are moving to release equity and they have a lot of savings already, so they aren't too concerned in terms of risks.  they are also both high earners so they have already been approved for the bridging loan.

but the buy to let mortgage may be of interest to you, and you should speak to a broker to see if you are even eligible for a bridging loan.