Buyer pulled out. Questions about bridging loan

reg091

House is back on for £550K. We had accepted £542K.

Hoenir

As has been said before. Market the property at a lower price and effect a quick sale. If there's a property you don't want to lose.

On top of interest charged there's often a lenders loan facility fee of around 1.5% of the amount advanced. For a 4 month loan period you'd incur £40k of costs in total. 

BonaDea

Why not work out how much the bridging loan would cost for a year (not only interest but all the fees on top) then knock that off the price of the house you're selling?  You'd be no worse off financially but would have much more control and be much less exposed to risk.

Flugelhorn

Don't forget also that if you buy the new house first you will have to pay stamp duty + 3% Higher rate upfront. - about £24K - you will get a good chunk of that back when you sell the first property but will need to have it available when you purchase 

Bigphil1474

Based on all the figures you have provided, if you get a proceedable offer over £500k, I'd take it. A mate of mine was looking at bridging loans and he'd have been penniless if it went on for more than 9 months so couldn't do it. There's a recent thread from a person who's house hasn't sold for 2 years, so need to bear that kind of delay in mind.

I think it would be a huge gamble for the sake of a house you really want to buy. I think you need a reality check.

reg091

We now have numbers provided by the bridging loan broker. It all seems to suggest that the original mortgage will be ported upon completion, so the bridging loan is for the remaining amount. This would cost 0.72% PM (8.64% APR) giving a total interest/fees of approx £18k if paid off at maximum term of 12 months.

I don't understand why the original mortgage people will port the mortgage without paying off first. Obviously we are asking them that. That doesn't make sense to me.

In terms of what we need to get from the sale: the house we want is a bit of a fixer-upper so we can't afford to take to much of a hit on the sale price of ours. £20K is probably max, so we could cut the price by that and hope that means a quick sale, or for the same approx cost go with the bridging loan which ensures we get the house and move quickly. If we then sell the house at the full price then all is well. Obviously the big risk is if the house isn't moving after a few months and we have to reduce it anyway then we are hit twice.

reg091

BonaDea said:

Why not work out how much the bridging loan would cost for a year (not only interest but all the fees on top) then knock that off the price of the house you're selling?  You'd be no worse off financially but would have much more control and be much less exposed to risk.

Could do, except there is one other factor: getting the bridging loan almost guarantees getting the house we want quickly (we were about to exchange), lowering the price of our current house doesn't mean a quick (or as quick) sale.

housebuyer143

I'm not a bridging loan expert but I would also be surprised if the mortgage company port your mortgage to the new place because you still own the old house, where will you get to money to pay that off? They are not just going to write off hundreds of thousands of pounds. You somehow need the full PP one way or another. 

Please report back but it really doesn't sound correct. 

reg091

Okay, got to the bottom of it now by speaking to our current mortgage provider (First Direct). They say IT IS possible to do it that way and some lenders will; they don't. It is to do with if they will accept a second charge on a property, and FD will not.

Back to the more sensible option then of trying to sell our house quickly and hope the one we want doesn't sell in the meantime.

Thanks for all your helpful advice.