Taking out a Bridging Loan

As I have mentioned before, next year I am hoping to move to Wales and also to considerably downsize my property. My house here in Surrey is worth approx. twice what the cost would be of a wee cottage. So, this is my idea: if I see something I want to buy, take out a bridging loan and buy it, then as soon as my house is sold, pay back the loan in full.
The two reasons for doing it this way are a) I am much less likely to lose the cottage I want and b) I figured that my house would sell faster if it is vacant possession.
Is this a good idea? is there anything I haven't thought of? If in theory it is OK, then where is the best place to apply for a loan? I haven't a clue, so any thoughts or suggestions on this would be very welcome!!!

Val

 

I can't offer practical advice, Val, as it's not something I've ever done. In principle it sounds OK as long as you can afford the interest on the bridging loan for as long as it takes to settle everything - and it can take an inordinate amount of time to tie everything up. Some friends of mine decided to sell their house and rent for a while (another option you might consider - at least you get to try out the area before you buy) so that they could (a) get away from their ghastly neighbours pdq and (b) buy their next house without being involved in a chain. Their house sold quickly but then things dragged on for nearly a year before they were finally able to move, by which time the landlord of the property they were hoping to rent had long lost patience with them.

How smoothly things go really is largely down to luck - not something which delights me, when there are large amounts of money involved.

 

not sure how things work here in the UK, however in south africa, bridging loans are normally given to businesses that have been awarded contracts and need the money to complete the work (that is a simple way of explaining)

the interest rate his very high in these cases

perhaps your best bet is to shop around with banks/buliding societies, and look at remortgage your property ....

the intrest rate is a lot less than taking out an overdraft or loan, and your property stands as collateral

 

Surely I can't sell a property that has been remortgaged??

Val

 

You might consider an "interest only" mortgage on the property you want to buy, using your existing house as collateral. (assuming there is no outstanding mortgage on that)

Speak to a 'real' bank manager or a mortgage consultant.

a-a

 

don't know how it works here in the UK, but I used to buy a property, fix it up, spruce up the garden and resell for profit (done 7 in total, including my very 1st property which was 6 acres of land, added a borehole, 6 foot fence all around, 360 cedrus deodora trees, lawn, and a bit of a garden)

and how it worked was that if you borrowed money on a property, the bank/building evaluator would vist, and he / she would evaluate the property, and grant a loan of up to 80% on the value

so, I'm guessing that it works the same here ...

if you apply to re-mortgage, an evaluator will determine what the property is worth, and grant a loan to that value

if you decide to sell the property, there should be no problem, as the bank/building society will take the outstanding money owed first .... there are penalties for early settlements, so check those out aswell

in my opinion, if it works the same way as it did when I used to speculate, this will be your best bet

bridging finance is for a quick loan to finish off a project etc and is geared up to businesses and not private individuals (as far as I understand)

best is to speak to a bank/building society as previouslsy mentioned

 

I would seek professional advice first. Good :D luck

 

I believe you will find its NOT the same, there is more to it than that.
e.g ability to pay it back, credit score, the list goes on

 

Strike now whilst the Iron is hot
You get the property you want
The bridging loan is mega money but Less than the rent you would be paying whilst finding the home you really want
Re-mortaging sounds good but the buy out of the mortgage would be more than the bridging loan (you are normally tied in for five years with a buy out clause)
If you take your new home and your old home is not selling at twice the price drop the price for a quick sale

I know nothing about finance other than being screwed and the banks always win
Current interest rates on investment is less than inflation so every pound you invest reduces by 10p per year
Thus buy the home you have fallen in love with, sell your old property and buy an additional house with the profit and rent it out rather than invest the profit

Jack McHammocklashing

 

Gemini, I would think a long while before deciding on a bridging loan. We all know the housing market is not good at the moment. What if it takes two years for you to sell your property. That's a lot of interest to pay on the bridging loan. Plus, your present house would be standing empty, think about maintenance on it while you're not living there. Also the chance of people breaking in and vandalism.

When my family moved to the island we couldn't get back to my property in Essex, the distance 300 miles was too inconvenient to travel on a regular basis. We put ours in the hands of an estate agent and rented it out until it sold.

 

If the economy goes chest up you could be stuffed there Val.

I've taken out a bridging loan once, lost my job, lost my buyer & then had to service both the mortgage and the bridging loan. Ended up with £26 in my bank when it was all over.

 

Yes, this is the way I wanted to go originally, BUT, finding a place to rent which will accept 3 dogs is nigh on impossible unfortunately, they also do not want smokers so I lose on both counts, but thanks for the suggestion.

Val

 

Smoking is not a problem, you can smoke outside. The dogs may be a little more difficult.