Hi there. Vaguely wondering about moving house and trying to work out what is affordable. Nothing is shifting here at the moment so wondering what we could afford if we bought the new house without selling the old and had a bridging loan while waiting to sell.
My questions are:
Are interest rates for bridging loans similar to mortgages, or higher?
How do they calculate how much they will lend you - is it the same total max as you could get for a mortgage? (if so we are scuppered as have fair bit of equity in house)
Is there any other way of doing it - for example coudl we extend our mortgage on existing house (currently very small) to withdraw the equity needed to buy the next one?
I'm not an expert but we looked into getting a bridging loan because our house sale (a few years ago) was about to fall through. IMO a bridging loan = financial suicide!! the interest rates are much higher than a mortgage.
However, you may be allowed to borrow more against the equity of your existing house, although this will depend on your ability to repay the loan. Why don't you ring your current lender and see what they say, you're under no obligation to take out a new mortgage with them.
Another option would be to rent out your existing house until it is sold
Bridging loans tend to be horribly expensive, and lenders don't generally like to do them,imhe.Closed briding loans ( ie only after contracts have been exchanged and have a max life of 28 days) aren't too bad, but open ended briding loans are the stuff of financial nightmares, and unless you are very high net worth, not generally available, except in extenuating circumstances, eg probate. Raising equity on your current home is a great idea, and i would start off by either talking to a financial advisor, or your current lender, just to get an idea of what is available to you.
thanks all, that's helpful. Guess I should investigate further just jiggling things around with the mortgages.
Thing is I'm thinking that with the market so flat, if I were in a position to move without depending on selling, it would put me in a very strong positoin with a seller if I do see the house of my dreams! Otherwise I'll end up in house chain hell for a year...
Don't really fancy letting, don't think our house is ideal for that anyway.
Bridging loans are VERY expensive - interest is flat starting from 1% per month (ie. if you had the loan for a year you would pay 12% in interest) plus most lenders charge a set-up fee, typically 1%, and there would be legal fees to pay. Some also have a redemption fee of about 1%. Max loan would usually be 70% of the property value. I would recommend taking one ONLY if you have already sold your house but need to complete on your new purchase before you complete on your sale.
You could re-mortgage your existing home and use the equity to purchase the new one. If you did this I would recommend a portable mortgage which you can then transfer to your new home without penalty. ( I am a fully qualified mortgage advisor by the way - but am also 7mths pg so hope I haven't forgotten anything!!) Let me know if you want any further info/advice
Just another idea has come to me - you could re-mortgage your current home on a buy to let basis, releasing any equity you need, rent it out and then get a normal residential loan on your new home. Buy to let mortgages are not based on earned income but on the anticipated rental income from the house (as assessed by a surveyor) and, if the rental is sufficient you can get a mortgage up to 85% of the value. Your resi mortgage is then totally separate and based on multiples of earned income.