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bridging loan
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we've found a house that we really want but our buyer is stuck in a chain. Is a bridging loan massively expensive? You never hear of anyone doing it, just people saying, "ooh, very expensive!"
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Not only am I a finance company who arrange bridging loans, but I have also had two in the past.
It is expensive - interest rates are typically 1.5% per month - however, it was the only sure way of getting the house that we wanted (and we have no regrets). It cost us a total of �5,000 on top of the bridging loan amount (�100,000) but we would happily have spent �10k on top of the asking price to get our house.
You must, must , must watch exit fees.
I have companies who I deal with who range in their charges from 1.25% - 4% per month. However, their fees both admin (at the start) and exit (at the end) vary tremendously.
You need to know that you are in a good position and convinced that you will sell within a few months and that your house is in a desirable area etc. If your house sale falls through, how quickly will you be able to sell to someone else?
You also need to make sure you have plenty of equity in your house - a bridging loan company will usually only take 75% of your valuation less your current mortgage.
Let me know if you want any further help, and if you give
me the value of your property, the mortgage outstanding and the amount you want as a bridging loan, I will happily tell you what sort of amounts you will expect to pay back.
It is expensive - interest rates are typically 1.5% per month - however, it was the only sure way of getting the house that we wanted (and we have no regrets). It cost us a total of �5,000 on top of the bridging loan amount (�100,000) but we would happily have spent �10k on top of the asking price to get our house.
You must, must , must watch exit fees.
I have companies who I deal with who range in their charges from 1.25% - 4% per month. However, their fees both admin (at the start) and exit (at the end) vary tremendously.
You need to know that you are in a good position and convinced that you will sell within a few months and that your house is in a desirable area etc. If your house sale falls through, how quickly will you be able to sell to someone else?
You also need to make sure you have plenty of equity in your house - a bridging loan company will usually only take 75% of your valuation less your current mortgage.
Let me know if you want any further help, and if you give
me the value of your property, the mortgage outstanding and the amount you want as a bridging loan, I will happily tell you what sort of amounts you will expect to pay back.
that's a brilliant answer, oneeyedvic, i feel like i've got my own personal advisor!
The house is a three bedroomed detached bungalow in a quiet residential area on the fylde coast - near blackpool.
We own the house and do not have a mortgage. we have been offered �149,000 and the house we want is �144,000
The house is a three bedroomed detached bungalow in a quiet residential area on the fylde coast - near blackpool.
We own the house and do not have a mortgage. we have been offered �149,000 and the house we want is �144,000
The way you would do it is very similar to the property we had (but we needed a mortgage as well).
Because you would actually own (for a short space of time) two houses, you can offer both as security. You see if you r house is worth �149,000 then a bridging lender will only want to lend you � 112,000 - which is obviously not enough to buy your new house. You would offer up the second house as additional security - and then when you sell your first house look to clear the loan and be mortgage free again.
Costings: You would need to borrow �144,000 (unless you have some savings that you can dip into) to buy the new house. The monthly interest would be around �1800 - 2400 per month. There would normally be a three month minimum period and there is often a setup cost of around 1% (�1440).
So if you borrowed the money for up to 3 months it would cost you (a minimum of) � 6840.
But, if your buyer pulled out or their chain broke etc, and you had to resell and it took an extra 2 months, it would cost you �10,440.
We were very fortunate in that (a) I have industry contacts so my cost of borrowing would be far cheaper than you could get and (b) we had a buyer who really wanted our property.
As a reality check, we had our house sold with in around 6 weeks (the �100k bridging loan was for around that long but subject to a 3 month minimum) - the people who purchased our house split up and put the house back on the market for �5k more than we asked for (I assume not for profit but to cover their costs). Although they didn't show it very well (they both moved out and the condition deteriorated), it took them around 16 months to sell it !!!
Hope this helps and please don't hesitate to ask any more questions.
Because you would actually own (for a short space of time) two houses, you can offer both as security. You see if you r house is worth �149,000 then a bridging lender will only want to lend you � 112,000 - which is obviously not enough to buy your new house. You would offer up the second house as additional security - and then when you sell your first house look to clear the loan and be mortgage free again.
Costings: You would need to borrow �144,000 (unless you have some savings that you can dip into) to buy the new house. The monthly interest would be around �1800 - 2400 per month. There would normally be a three month minimum period and there is often a setup cost of around 1% (�1440).
So if you borrowed the money for up to 3 months it would cost you (a minimum of) � 6840.
But, if your buyer pulled out or their chain broke etc, and you had to resell and it took an extra 2 months, it would cost you �10,440.
We were very fortunate in that (a) I have industry contacts so my cost of borrowing would be far cheaper than you could get and (b) we had a buyer who really wanted our property.
As a reality check, we had our house sold with in around 6 weeks (the �100k bridging loan was for around that long but subject to a 3 month minimum) - the people who purchased our house split up and put the house back on the market for �5k more than we asked for (I assume not for profit but to cover their costs). Although they didn't show it very well (they both moved out and the condition deteriorated), it took them around 16 months to sell it !!!
Hope this helps and please don't hesitate to ask any more questions.
Don't go to 'shark 'companies that are crusing round ready to bite your limbs off. I had a bridging loan from my normal bank who only charged the market rates, their risk is nil, the assets are so valuable, they need an admin fee, yes, but the rate should be only slightly over base, assuming that you are a first class credit risk, of course.
And they get their dosh direct from the solicitiors anyway when the sales goes through. No real sweat for them!
And they get their dosh direct from the solicitiors anyway when the sales goes through. No real sweat for them!
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