Experiences of bridging finance

[StiffyByng]

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.

It does mitigate it a little. Luckily we had a valuation done when we started renting it out so we can self-assess on the increase since then (our accountant advises) so it's less than it might have been. But it definitely chips away at the impact. As does the cost of paying the mortgage for longer without a tenant.

I would only proceed if you factor in some 'likely worst case' scenarios e.g. big price reduction AND 12-18 months interest....

Not for me, too risky.

An update and end to this particular thread, the finance people did not recommend the bridging loan but have offered us enough borrowing to refinance our original house with a BTL mortgage and buy the second. This will be a short term measure but the amounts work, and it means we can crack on with our purchase pretty quickly without relying on a sale. We need to go through the BTL T&Cs thoroughly and we will only take that route if we have no offer in a fortnight, but it's the safety net we needed.

You have either misunderstood your accountant or their advice is incorrect.

OK, well, we will make sure our assessment is correct when we make it whenever that is. A tax accountant told us we would be liable on sale for CGT on the percentage of the sale price since we stopped using it as our primary residence.

I have to say I really don’t understand why so many posters in this site have to be rude.

Eg the valuation of our house when we started renting it out was above what we’d paid for it, and since then it has risen slightly, so we would be liable for CGT on the profit on it over the rental period rather than the total rise in value.

As I said, if we misunderstood his expert advice we will make sure we make a correct declaration.

Actually looking at the online guidance I can see that is not the case (explicitly excluded in fact) but the fact that we live overseas goes far more in our favour that we were led to expect by him!

Our tax accountant is a not-expert in CGT friend but I’m quite pleased in this case that he was off the ball.