Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Flip

1 2

Original poster

Experiences of bridging finance

32 replies

StiffyByng · 14/06/2021 17:33

We’re in the irritating situation of trying to sell a house in what feels like the only part of the UK where houses are NOT flying off the shelf within hours while needing to buy one in one where they are. Our house will eventually sell but we have found a house to buy that is perfect for us, and in a year of looking we’ve found nothing else in our price range that we like, had our offer accepted and now have pressure to move.

We’ve been offered a bridging loan for the deposit. The APR is high of course but we will he paying it back within months and can afford the repayments.

Has anyone else done this and have any words of caution for us? Obviously the longer it takes to sell our house, the more this will cost us.

OP posts:

CharlieAteThePies · 14/06/2021 18:10

A friend did this years ago when waiting for money to come through from probate. It’s expensive as you mention. In his case, he knew the money would come through in a short time. Do you know for sure that you can pay it back “within months”? Otherwise it’s a big risk!

mareep · 14/06/2021 18:41

Do you have enough of a deposit to get a mortgage? Rates are incredibly low, and we found it cheaper to get a two year fix.

Original poster

StiffyByng · 14/06/2021 18:50

@CharlieAteThePies

Our house is on the market and average time to go under offer is 10-12 weeks. By the time conveyancing on our purchase is done we’d be unlucky not to be under offer so would just need to hang on for however many months that takes. But obviously there are no guarantees.

OP posts:

Original poster

StiffyByng · 14/06/2021 18:51

@mareep

Do you have enough of a deposit to get a mortgage? Rates are incredibly low, and we found it cheaper to get a two year fix.

We’ve got a mortgage offer but need the deposit, which would be the loan until we had proceeds of sale.

OP posts:

HidingFromDD · 14/06/2021 19:04

does your mortgage offer include the fact that you've already got a mortgage on the first property or is it assumed that has sold? you'd actually be buying a second property so the offer is likely to be different

Original poster

StiffyByng · 14/06/2021 19:07

No, at this point it’s just an AIP so we’ll need to check whether the bridging loan is a no for them. We have several AIPs from various lenders as so long as we sell our house we have a strong LVT and good affordability. I’m hoping that this possibility won’t transform us into untouchables but we don’t know for sure!

OP posts:

Gardenwalldilema · 14/06/2021 19:21

I'd really recommend against it.
We bought from a lady who had done this, she was frantic with every passing day, we ended up knocking her down a fair bit too, she was absolutely desperate.
If your house doesn't sell you could waste twns of thousands in interest and / or end up taking a huge hit on the sale price.

Original poster

StiffyByng · 14/06/2021 20:01

@Gardenwalldilema

I'd really recommend against it. We bought from a lady who had done this, she was frantic with every passing day, we ended up knocking her down a fair bit too, she was absolutely desperate. If your house doesn't sell you could waste twns of thousands in interest and / or end up taking a huge hit on the sale price.

Thanks, that’s the sort of cautionary tale I need to know about. My fear though is that we’ll end up selling it at a huge hit from haste and still lose the house, so am thinking we view the interest as the same as that but being able to buy the house. We can afford interest or a hit to some extent in the interest of actually getting a sodding house. The alternative is possibly spending the same amount as the interest in rent payments while we try to sell/buy. All options involve money lost in some way.

OP posts:

StartingGrid · 14/06/2021 20:05

We bought from someone who had two other sales fall through first and had a bridging loan, the amount extra it cost them in the end could have gotten them a brand new kitchen!

yourestandingonmyneck · 14/06/2021 20:27

Would you be able to put your house on a bit cheaper in order to sell quickly.

I'm guessing you are in England. This would work quite well in Scotland (houses are generally sold on an "offers over" basis, but for quick sales they go on at "fixed price). Not sure it would really work in England though.

Either way, make sure your house is not overpriced because that will just slow everything right down.

Original poster

StiffyByng · 14/06/2021 20:38

We spent ages checking and double checking that the price is reasonable, so are fairly confident it’s not OVER priced against other houses, but would be willing to drop the price to get a quick sale. But then we’re losing the same money we would pay in interest, probably more (my ready reckoning is that to drop it enough to stand out in the market would be roughly 9-12 months of interest, maybe more)! So it feels like we’re paying it either way.

At least with drastically cutting the price we know for certain what it’s costing us at the outset rather than risking months of interest building but I worry we could do that, then see a chain collapse, lose the house we want anyway, and then not be able to go back on at a bit more later on, while prices are going to carry on rising here. We will sell at the higher price eventually (or at least get a decent offer against it) - it’s just the timing that’s an issue.

We did contemplate putting it on very low to start with but everyone advised us against it saying that we’d always regret not knowing how much more we could have made. It was such a hard decision.

OP posts:

titchy · 14/06/2021 20:42

It won't be just the deposit though. Once your purchase is at the point of needing the deposit, you're at the point of committing to buy so you'd need the full amount of your purchase, as well as your current mortgage just a few weeks later.

Original poster

StiffyByng · 14/06/2021 20:43

We’d have the mortgage in place to cover the rest of the new purchase so that wouldn’t be a problem. Our house is currently rented out (we rent ourselves at the moment) so the existing mortgage is covered.

OP posts:

Original poster

StiffyByng · 14/06/2021 20:45

But actually we do need to think about needing to cover our existing one for a period too as we wouldn’t expect our tenants to live with uncertainty and we know they’re looking already, understandably. So that will need to be figured into our outgoings for as long as it takes.

OP posts:

titchy · 14/06/2021 20:49

You're also risking that your tenants don't vacate upon exchange. And it could take a year to get them out.

And your current offers won't have been made on the basis that you continue to have a second mortgage on the property you're trying to sell.

Original poster

StiffyByng · 14/06/2021 21:08

No, our tenants are excellent and perfectly reasonable. But want to be in a new house by September for schools so a vacant period is almost certain.

We’ll be talking to mortgage companies tomorrow but I’m not too concerned: to put it bluntly, they are all throwing cash around at the moment, and the company marketing bridging loans to pay deposits in a delayed sale is one of those who have offered us finance. Obviously if they say no, then that’s the end of the idea anyway!

OP posts:

Original poster

StiffyByng · 14/06/2021 21:13

I don’t mean to say I’m not listening to words of caution. The decision is very much not made yet. But the practical issues are just a yes or no on the possibilities, not the wisdom of jumping either way, if you see what I mean.

OP posts:

jiskoot · 14/06/2021 22:04

My DH and I had a fixed term bridging loan to help buy our current house as we couldn't sell his existing property. We were warned by our solicitor against it at the very beginning and I wish we'd listened to her. Never been so stressed in my life. Our house purchase dragged on for longer than expected by a few months, we were forking out £1200 a month on the bridging loan and in the end it barely got paid off in time. It was hanging over us constantly for months. Obviously it was worth it in the end as it all worked out okay but I've vowed that we'll never get another one.

Original poster

StiffyByng · 14/06/2021 22:17

I can imagine this! Definitely something that scares me.

OP posts:

Andthenanothercupoftea · 15/06/2021 08:32

At what point do you have to commit to the bridging loan?

If you don't need it until exchange, surely you'll have a good idea on timescales for the sale of your property. It wouldn't be great to have to pull out at that point, but it might be that you get a few weeks down the line and you've not had a single viewing on your house which will inform your risk. However that's exactly why you may be seen as a risky buyer when you put in an offer on this property.

Regardless, I'd get your property on the market now as even if this house goes, you don't want to be in this position again in another few weeks.

NoraNorth · 15/06/2021 09:20

I don't think you will get any offers until the tenants have moved out. You might be confident they will move out in the next few weeks but a buyer will know if they don't go willingly then it will likely be a minimum 12 months before the property has vacant possession. I think the tenant position makes an expensive bridging loan plus 2 mortgage repayments very risky.

Original poster

StiffyByng · 15/06/2021 10:12

Tenants have signed a contract on a new property starting mid-August so I will make sure the estate agents tell viewers that. There is no chance at all of any complications there but I realise others won’t know to be so confident.

We are already on the market and have had viewings but no offers - feedback has picked up everything we know to be the weak elements of our house but no mention of the tenants - I appreciate though that people might think it but not mention it.

Our offer here has been accepted on the proviso that we become proceedable within a month, and we are almost two weeks in.

OP posts:

friendlycat · 15/06/2021 10:38

I know of two people who have done this and both regretted their decisions hugely. It cost both of them a fortune as both had problems with their sales - one sale nearly ran for a year and the interest was vast.

It just adds another level of stress to an already stressful situation.
You are are already in a difficult position of selling in an area that is slow and wanting to buy in an area that is moving at a fast pace. I would be tempted to see what happens. If you are proceedable in the next two weeks so be it, if not then wait to sell first. But if you do proceed with this factor in much longer than you think in terms of interest etc.

Original poster

StiffyByng · 15/06/2021 10:44

Thanks. We are currently leaning towards a big price reduction rather than a loan I must admit, but my rough calculations were that we would be paying the loan for almost a year to spend more that way than the reduction. If possible though we want a clean break, and not counting the cost of delay that way. Discussing with finance people today though.

I can’t really overstate the horror of buying here right now. I know we’re not alone but there are so few properties for sale and prices have shot up to the point that a local estate agent posted on social media today that the industry is in crisis. Sure, they’re making a bit more money on sales but some have had no new properties for months.

OP posts:

NoraNorth · 15/06/2021 11:33

What is your capital gains tax position on the house you are selling? That might reduce the impact of a price reduction.

Flip

1 2