Buyer pulled out. Questions about bridging loan

reg091

House we are buying is £455K

We are going to port mortgage from current house, approx £275K, obviously making up the shortfall on the purchase of £180K with proceeds from the current house (we are downsizing).

Porting obviously involves us paying off the existing mortgage with the proceeds of the sale, and starting a new loan for the same amount on the new house.

We are looking into a bridging loan so we don't lose the house we are buying.

My assumption is that we need a bridging loan of £455K. 

However, a financial adviser/bridging loan expert has told us that we only need the shortfall (£180K).

I don't understand! That means that as soon as we complete the purchase mortgage lenders do the porting even though we still own the current house and still owe them £275K? 

Flugelhorn

Sounds odd - you would normally need the whole £455K - otherwise the same  mortgage is covering 2 properties.

MattMattMattUK

reg091 said:

House we are buying is £455K

We are going to port mortgage from current house, approx £275K, obviously making up the shortfall on the purchase of £180K with proceeds from the current house (we are downsizing).

Porting obviously involves us paying off the existing mortgage with the proceeds of the sale, and starting a new loan for the same amount on the new house.

We are looking into a bridging loan so we don't lose the house we are buying.

My assumption is that we need a bridging loan of £455K. 

However, a financial adviser/bridging loan expert has told us that we only need the shortfall (£180K).

I don't understand! That means that as soon as we complete the purchase mortgage lenders do the porting even though we still own the current house and still owe them £275K? 

Have you considered the interest rates on bridging loans? They are usually horrific, currently around 1.5-2% interest per month, so you will be incurring £2,700-3,600 interest PER MONTH just on the £180k amount. If the bridging loan is on the full amount, which I think it would be, then it would cost you £6,825-9,100 per month in interest. 

How long can you sustain those payments if things drag on and even if you can sustain them is that a sensible thing to do? 

reg091

Totally understand the horrific interest rates. To get the house we want we are prepared to pay a price for everything that means. How much is too much we will make a decision on once we know the numbers. Factoring in having to shell out for another survey and another set of solicitors fees if we have to find a new house (we were about to exchange). Plus the commute from staying here will be horrendous and costly.

housebuyer143

reg091 said:

Totally understand the horrific interest rates. To get the house we want we are prepared to pay a price for everything that means. How much is too much we will make a decision on once we know the numbers. Factoring in having to shell out for another survey and another set of solicitors fees if we have to find a new house (we were about to exchange). Plus the commute from staying here will be horrendous and costly.

If you are going to reduce the price say £30k if that's 3 months interest on that loan, are you not best off taking it to auction and selling it below market value? Will your purchase wait that long?

reg091

housebuyer143 said:

reg091 said:

Totally understand the horrific interest rates. To get the house we want we are prepared to pay a price for everything that means. How much is too much we will make a decision on once we know the numbers. Factoring in having to shell out for another survey and another set of solicitors fees if we have to find a new house (we were about to exchange). Plus the commute from staying here will be horrendous and costly.

If you are going to reduce the price say £30k if that's 3 months interest on that loan, are you not best off taking it to auction and selling it below market value? Will your purchase wait that long?

We don't know how long the people selling will wait. We stand to make a profit of about £100K on the sale/purchase (if we get what we were offered around what our buyer who dropped out was paying), so we have some elbow room.

I just need to find out if we need to borrow the full amount or the smaller amount the bridging company are suggesting.

Flugelhorn

reg091 said:

housebuyer143 said:

reg091 said:

Totally understand the horrific interest rates. To get the house we want we are prepared to pay a price for everything that means. How much is too much we will make a decision on once we know the numbers. Factoring in having to shell out for another survey and another set of solicitors fees if we have to find a new house (we were about to exchange). Plus the commute from staying here will be horrendous and costly.

If you are going to reduce the price say £30k if that's 3 months interest on that loan, are you not best off taking it to auction and selling it below market value? Will your purchase wait that long?

We don't know how long the people selling will wait. We stand to make a profit of about £100K on the sale/purchase (if we get what we were offered around what our buyer who dropped out was paying), so we have some elbow room.

I just need to find out if we need to borrow the full amount or the smaller amount the bridging company are suggesting.

honestly think the bridging company have misunderstood unless you have a significant cash deposit / savings that you are planning to put towards the new property ?

Hoenir

You'll need to raise the entire purchase price one way or another. How much cash are you able to put in?  You may struggle to obtain a bridging loan for the entire amount. 

reg091

Flugelhorn said:

Honestly think the bridging company have misunderstood unless you have a significant cash deposit / savings that you are planning to put towards the new property ?

Hoenir said:

You'll need to raise the entire purchase price one way or another. How much cash are you able to put in?  You may struggle to obtain a bridging loan for the entire amount. 

We have no cash to put in. I think they have misunderstood too, it makes no sense.

enthusiasticsaver

They have misunderstood.  You will need the full £455k if you have no cash to put in.  How much is the existing property worth? 

Bridging loans are expensive. 

bobster2

You haven't said how much equity you have in total in your current house? You've said it'll be at least £180k but as you're downsizing presumbly your current house is worth more than £455k.

How much are you hoping to sell your current house for?