Bridging or other - please help!

Pipistrel

Hi

Can anyone tell me how I could use a bridging loan (or something else!) to help with this situation?
Selling my house for £250,000 (approx), original buyers have backed out with mortgage problems so its back on the market. However we have purchased a house for £400,000 with a move in date of 6th June. Unfortunately the missives are concluded (in Scotland) so we are committed to this. Was relying on £60,000 from the equity of the house sale to put towards deposit, have the rest of the deposit, stamp duty etc in cash. We still *might* sell in time but if we don’t what are our options. If we didn’t need the equity for a deposit we’d be able to afford both mortgages for a couple of months but this is a non-starter. Can someone tell me how does bridging work? Have only ever heard it’s the spawn of the devil and a websearch didn’t really tell me much. How much is it likely to cost based on the above figures? Anything else we can do in this situation beyond throwing ourselves on the mercy of our sellers for a date change.

homer_j_3

How much of a mortgage do you have on your current property? If you have enough equity, you may be able to borrow this as a further advance and rent the property out if you do not get a buyer in time.

Bridging loans are expensive and you can either have open or closed bridging. 1 is for the set time, the other is ongoing.

You will be talking thousands in interest. I would explore the first option.

Pipistrel

Mortgage on the old property is £188,000 so unless we borrowed to bring it up to 100% it wouldnt be enough : ( I gather that 100% is a big no-no at the moment

Conrad

Bridging finance is now also affected by the credit crunch.

A few pointers;

1) 75% max borrowing against new asset and possibly to utilise some of the existing property equity

2) Lenders will want a sensible and demonstrable 'exit route' whereby they have a clear path as to how the bridging will be repaid in say 6 months time

3) Expect to pay from 1.5% per month. Thats £1500 per month for every £100k borrowed


You say you have savings. If sufficient in size I would use that as a deposit on the new home and 'temporarily' rent out the existing one. A self cert mortgage might be possible. Note many lenders will want written permission provided from existing lender to let the place. n experienced broker will be needed for this one me thinks as there are dozens of pitfalls such as if you do say you will the place, the rent has to be greater than the mortgage payment.

Conrad

BEWARE BEWARE; Upwards of 1 million mortgage applications have been declined in nthe last 12 months and this will only get worse due to the liquidity crisis.

This means no matter how confident your next buyer is of arranging a mortgage, nothing is certain and the market changes by the day with lenders stopping lending without notice.

homer_j_3

what mortgage will be on the 400k property?

silvercar

Closed bridging is where you already have an exit in place ie you know that completion dates are fixed at both ends and are borrowing for a fixed length of time and already have your mortgage offer in writing. Open bridges are where you don't know for definite how long you will need the money. Closed bridges are expensive but safer as you know the costs in advance, open bridging is the risky one.

A friend in the bridging business tells me that 50% of open bridges last longer than the original intention and 30% + last over 6 months. This was before the credit crunch.

Pipistrel

We could continue to pay both mortgages for a couple of months, the issue is the deposit. Is is possible to bridge for just 70K and continue to pay both houses or am i talking rubbish.

Thanks

Trollfever

Not sure about Scottish property law, but could you buy yourself out of the purchase contract?

Cutting your losses and running could save you a fortune on unknown interest charges in a very uncertain climate.

silvercar

Pipistrel wrote: »

We could continue to pay both mortgages for a couple of months, the issue is the deposit. Is is possible to bridge for just 70K and continue to pay both houses or am i talking rubbish.

Thanks

Yes, if the lender on the second will agree to you taking out the new mortgage before the first property has sold, bridge for the 70k. If the lender won't agree then you could bridge for the amount you need until the first property sells. Then when the first property sells you repay the bridge.