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  • FIRST POST
    • beanfarmer
    • By beanfarmer 8th Nov 18, 6:09 PM
    • 77Posts
    • 32Thanks
    beanfarmer
    Do these bridging loan rates seem excessive?
    • #1
    • 8th Nov 18, 6:09 PM
    Do these bridging loan rates seem excessive? 8th Nov 18 at 6:09 PM
    This was sent to me from a local broker who told me he does over 400 buy to let mortgages per year therefore I regard him as "experienced and knowledgeable in this area" I also understand that bridging is essentially the same thing as a short term mortgage

    This was presented to me as the "best option" and virtually only option because I've not got any income.

    Bridging Illustration
    The example below is on a deducted interest basis for the initial 12 months i.e. the interest is funded from the total £Gross Loan” and therefore you have no payments to make during the duration of the loan.
    If the loan redeems early then a rebate of non-utilised interest will be calculated
    The loan term is 12 months deducted with a 12 month period thereafter with serviced interest = Total 24 months
    Paid Up Front

    Net Loan Amount: 30,000.00 Monthly Interest Rate: 0.75%

    Lender Fee: 600.00 No Loan Term (Months): 12m + 12m

    Valuation Fee: 294.00 Yes Lender Fee: 2.00%
    Legal Fee: 500.00 No Broker Fee: 0.00%
    Broker Fee: 3,000.00 No Completion Date: 30/09/2018
    Title Insurance Fee: 150.00 No First Mortgage: -
    Security Release Fee: 195.00 Property Valuation: 300,000
    Gross Loan Amount: 34,250.00
    Total Charge for Credit: 7,588.54
    Total Amount Payable: 37,639.54
    Total Interest: 3,194.54

    Additional Costs
    £495.00 Acceptance Fee
    £350.00 Valuation Fee
    £750.00 + VAT Lender Legal Fees
    £TBC Clients Legals
    Last edited by beanfarmer; 11-11-2018 at 3:15 PM.
Page 1
    • Thrugelmir
    • By Thrugelmir 8th Nov 18, 6:39 PM
    • 61,104 Posts
    • 54,324 Thanks
    Thrugelmir
    • #2
    • 8th Nov 18, 6:39 PM
    • #2
    • 8th Nov 18, 6:39 PM
    Bridging loan isn't a short term mortgage. It's finance to bridge an interval between 2 transactions. Often for property but not necessarily.

    Expensive because the costs of arrangement aren't recouped through the interest alone. Plus the additional risk involved.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • CakeCrusader
    • By CakeCrusader 8th Nov 18, 7:17 PM
    • 624 Posts
    • 341 Thanks
    CakeCrusader
    • #3
    • 8th Nov 18, 7:17 PM
    • #3
    • 8th Nov 18, 7:17 PM
    As above, these are supposed to be short term loans to bridge a gap in a purchase or a mortgage (say you're close to completing on a house purchase but your cash is tied in a long term account and can't be released until after you've completed. Losing your deposit could cost you tens of thousands and paying the seller's interest/charges could cost you thousands so it can be the cheaper option). This isn't a loan for the long term.
    • DCFC79
    • By DCFC79 8th Nov 18, 7:54 PM
    • 32,975 Posts
    • 20,767 Thanks
    DCFC79
    • #4
    • 8th Nov 18, 7:54 PM
    • #4
    • 8th Nov 18, 7:54 PM
    As above, these are supposed to be short term loans to bridge a gap in a purchase or a mortgage (say you're close to completing on a house purchase but your cash is tied in a long term account and can't be released until after you've completed. Losing your deposit could cost you tens of thousands and paying the seller's interest/charges could cost you thousands so it can be the cheaper option). This isn't a loan for the long term.
    Originally posted by CakeCrusader

    Maybe Ive read it wrong but you have contradicted what "Thrugelmir" has said, Thrugel says a bridging loan isn't a short term mortgage and look at your last sentence.
    • CakeCrusader
    • By CakeCrusader 8th Nov 18, 7:58 PM
    • 624 Posts
    • 341 Thanks
    CakeCrusader
    • #5
    • 8th Nov 18, 7:58 PM
    • #5
    • 8th Nov 18, 7:58 PM
    Maybe Ive read it wrong but you have contradicted what "Thrugelmir" has said, Thrugel says a bridging loan isn't a short term mortgage and look at your last sentence.
    Originally posted by DCFC79

    A bridging loan isn't a mortgage, it's a loan used for a short term purpose, like if there's a time delay between completing a house purchase and having the funds to pay for the house purchase. It acts like a cash til pay day loan. It's a short term loan, often used until the mortgage funds can be transferred to the vendor. A bridging loan isn't supposed to be used in the long term, it's not a mortgage, it's a loan. Does this help?
    Last edited by CakeCrusader; 08-11-2018 at 8:05 PM.
    • Brock_and_Roll
    • By Brock_and_Roll 9th Nov 18, 8:56 AM
    • 887 Posts
    • 885 Thanks
    Brock_and_Roll
    • #6
    • 9th Nov 18, 8:56 AM
    • #6
    • 9th Nov 18, 8:56 AM
    Its £3k because in a nutshell the lender only has 6 months to earn any money to recoup (the significant) costs and earn a profit as opposed to 25 years.

    If it makes the OP feel any better the last time I had an open bridge in addition to paying a £3,500 fee, I ended up with two bridging loans from GE Capital at 7.5% - squeezed the very life out of me.

    IMHO bridging loans are very risky and highly stressful - despite the best laid plans, something can always go wrong and you can be left up to your neck in it.

    So I would not recommend unless in exceptional circumstances and if you have good nerves!
    • foxy-stoat
    • By foxy-stoat 9th Nov 18, 9:17 AM
    • 3,088 Posts
    • 1,731 Thanks
    foxy-stoat
    • #7
    • 9th Nov 18, 9:17 AM
    • #7
    • 9th Nov 18, 9:17 AM
    This was presented to me as the "best option" and virtually only option because I've not got any income.
    Originally posted by beanfarmer
    Based on that alone - it is a very good offer - PLEASE dont that it and find another way to get your £30,000 with £0.00 income for your property empire !

    https://forums.moneysavingexpert.com/showthread.php?t=5921477
    Last edited by foxy-stoat; 09-11-2018 at 9:20 AM.
    • Thrugelmir
    • By Thrugelmir 9th Nov 18, 10:03 AM
    • 61,104 Posts
    • 54,324 Thanks
    Thrugelmir
    • #8
    • 9th Nov 18, 10:03 AM
    • #8
    • 9th Nov 18, 10:03 AM
    The loan is for £30,000 but yet the broker sees fit to charge £3000?
    Originally posted by beanfarmer
    Makes no difference to the broker how much you borrow. It's the time involved that costs them the money.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • CakeCrusader
    • By CakeCrusader 9th Nov 18, 12:05 PM
    • 624 Posts
    • 341 Thanks
    CakeCrusader
    • #9
    • 9th Nov 18, 12:05 PM
    • #9
    • 9th Nov 18, 12:05 PM
    You're paying them to find a deal for you and they can pretty much charge what they like.
    • Lungboy
    • By Lungboy 9th Nov 18, 12:34 PM
    • 1,569 Posts
    • 1,571 Thanks
    Lungboy
    How are you intending to service this loan with no income?
    • financegeek
    • By financegeek 9th Nov 18, 7:47 PM
    • 82 Posts
    • 103 Thanks
    financegeek
    How are you intending to service this loan with no income?
    Originally posted by Lungboy
    there aren't any repayments which is why a bridge was probably seen as the 'best' option.

    The interest for the term of the loan is calculated at the start and added on to the balance. when the loan is cleared by whichever method OP is using, the original borrowing + repayments + interest will need to be repaid in full.
    • beanfarmer
    • By beanfarmer 9th Nov 18, 9:15 PM
    • 77 Posts
    • 32 Thanks
    beanfarmer
    Its £3k because in a nutshell the lender only has 6 months to earn any money to recoup (the significant) costs and earn a profit as opposed to 25 years.

    If it makes the OP feel any better the last time I had an open bridge in addition to paying a £3,500 fee, I ended up with two bridging loans from GE Capital at 7.5% - squeezed the very life out of me.

    IMHO bridging loans are very risky and highly stressful - despite the best laid plans, something can always go wrong and you can be left up to your neck in it.

    So I would not recommend unless in exceptional circumstances and if you have good nerves!
    Originally posted by Brock_and_Roll
    Thanks for your post. So the bit I notice is you also had to pay £3000 arrangement fee! Well "Golly Gosh and Jumping Jehoshaphat"!!!! I thought solicitors were the highwaymen of the professional services industry (Excluding those that post and support the MSE community of course)well it seems they've got some stiff competition.
    • financegeek
    • By financegeek 11th Nov 18, 1:49 PM
    • 82 Posts
    • 103 Thanks
    financegeek
    Is there any reason you can't just get a BTL mortgage now?

    I'd consider approaching an alternative broker before going down the bridging route just to double check there aren't any other options!
    • beanfarmer
    • By beanfarmer 11th Nov 18, 2:00 PM
    • 77 Posts
    • 32 Thanks
    beanfarmer
    Hi financegeek, yes the exact situation is that I own unencumbered assets ie property and am newly self employed meaning I have no income. This might be possible to get a buy to let mortgage on the property in question if it were habitable but as the house needs to have the refurbishment complete the only option is for bridging. I wince at the overall cost but I have to confess the house had unexpected additional building works that I didn't account for and essentially haven't got enough money to finish the house in a reasonable time frame

    Once I borrow the bridging finance I can then get a buy to let mortgage on it when the house has been let, I'm going to go for at least an 18 month bridging loan so at least I'll have time to sort out a mortgage
    Last edited by beanfarmer; 11-11-2018 at 2:02 PM.
    • CakeCrusader
    • By CakeCrusader 11th Nov 18, 2:21 PM
    • 624 Posts
    • 341 Thanks
    CakeCrusader
    Thanks for your post. So the bit I notice is you also had to pay £3000 arrangement fee! Well "Golly Gosh and Jumping Jehoshaphat"!!!! I thought solicitors were the highwaymen of the professional services industry (Excluding those that post and support the MSE community of course)well it seems they've got some stiff competition.
    Originally posted by beanfarmer

    Solicitors have to be transparent with the fees, so you'll know exactly how much you've been charged for letters/phone calls etc right from the outset, they also have different payment terms, like a conditional fee arrangement or pay as you go. Given each solicitor is a professional who's spent 4 years at University at the cost of about 50k, followed by another 2 years of training, they aren't really "highwaymen" of the professional services industry, they are mostly just trying to repay their student loans.
    • beanfarmer
    • By beanfarmer 11th Nov 18, 3:25 PM
    • 77 Posts
    • 32 Thanks
    beanfarmer
    Solicitors have to be transparent with the fees, so you'll know exactly how much you've been charged for letters/phone calls etc right from the outset, they also have different payment terms, like a conditional fee arrangement or pay as you go. Given each solicitor is a professional who's spent 4 years at University at the cost of about 50k, followed by another 2 years of training, they aren't really "highwaymen" of the professional services industry, they are mostly just trying to repay their student loans.
    Originally posted by CakeCrusader
    Well said sir! Very well said!!
    Last edited by beanfarmer; 11-11-2018 at 5:12 PM.
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