Bridging Loan info required, for purchase and sale in Scotland

The concept of "bridging loan" has disappeared from the High Street banks in England. You have "loan" and "mortgage" which you justify on your salary and secure on your house. No doubt a mortgage broker will be able to find you a specialist lender, but for our "bridging loan" we had to take out a 10 year mortgage topped up with 2 years of repayments.

Cost?

In message , snipped-for-privacy@hotmail.com writes

Bridging Loans are not seen so much these days. Banks will only do 'closed' bridging these days, i.e. if contracts have been exchanged (I assume that you are in Scotland - does 'missives have been concluded' mean that the transaction has passed an irrevocable stage?) and if they are satisfied that you can afford to pay the interest on top of your mortgage. The old clearing banks should be able to do it and would charge 1 - 2% over base rate, plus a set up fee, typically 1%, plus legal costs. The legal costs will depend on whether they rely on solicitors' undertakings (dont know if these work in Scotland) or require charges over one or both properties.

If the deal has not got past the irrevocable stage, then this is called 'open' bridging and Banks dont generally like these unless, exceptionally, your income is such that using normal income multiples (e.g. 3.5 x salary etc.,) you can justify a 100% mortgage on your new house as well as your existing mortgage. If this is the case then almost any mortgage lender will help you just be granting you an additional mortgage on your new house which you will reduce or repay when your old house is sold.

In message , Troy Steadman writes

Had you exchanged contracts on both properties when you applied for the loan?

(Those costs seem enormous!)

No. This is to buy the other half of a residence I half own. Cost of property £190k, + £25k to improve it, + £35k repayments and fees £250k (which I forgot to mention)

Interest only loan, and it's mainly the redemption fee, 3% in the first year falling yearly by 1% to 0% in year 4.

Monthly repayments at 5 1/2% for 2 year = £1,150, rising to 6 1/2% £1,360 thereafter (variable).

Is that expensive?

Mind you, the solicitors fees are not a cost of the "bridging loan" . There is:

Total: £1,000

Yes. Whoppingly so.

Why didnt the broker get you a deal with no early redemption penalty? There are loads & Loads of them around.

Arrangement fee £1250!! That is a complete rip of. Typical arr fees are £250-£350.

How did you eventually pay off the loan, by selling something else?

In message , Troy Steadman writes

They will be if the 'bridging' lender wants its own legal charges on both properties.

oy

This is happening now. I have no credit history (adverse or otherwise) and insufficient income to support a normal mortgage.

The loan will be paid off by selling the house and buying a cheaper one, probably this time next year. Since it is valued at £600 to 750k, there is likely to be a big profit in it, but it has to be done very quickly. The charges are high but I had the feeling 5 1/2% was low?

In message , Troy Steadman writes

Ahh, I understand now. Your situation isnt suitable for a bridging loan at all, which is probably why you got turned down at the banks.

For a normal mortgage it is about average but there are many decent at

I arranged it through a Chartered Accountant, so I hope there's a finder's fee for him included, otherwise that's something else to add on! I don't pay professionals for their advice very often; when I do I'm happy to pay them their going rate.

In message , Troy Steadman writes

I dont think there was a going rate. Anyway, you can rest assured that if he dd get a fee, he should be offsetting that against the bill for any work he does for you.

For info, I have now contacted my lender, Scottish Widows Bank, who were very helpful.

It would appear that "bridging loans" are indeed no more.

However, they are prepared to give us an interest only mortgage for 5 weeks, for the purchase price of the new place (160 - 170K), at their standard variable rate (4.94%), with no set up fees, and no redemption fees when we pay it all back when we get the proceeds from our current house.

wrote

Do you not currently have a mortgage on the current house?

In message , snipped-for-privacy@hotmail.com writes

Brilliant!

We do, but have enough savings that we were able to convince them we could pay both loans for the period required.

wrote

As the proceeds of the current house are enough to pay off the earlier mortgage *and* the new mortgage, then it appears that you wouldn't have needed a "bridging" loan anyway -- you could just have re-mortgaged the first house for a higher amount?

I don't think there is evidence support that conclusion.

I think "We have enough savings that ... we could pay both loans for the period" means that the savings are sufficient *to service* the new loan (the existing old loan being serviced from income as usual, but the sum of the two loans being well in excess of what the "income multiples" rule would permit).

There was no suggestion that his savings plus equity could completely fund the purchase of the second house.

I think what Keith is saying is that the lender is happy to lend him the full purchase price of the new house, on the understanding that for the first 5 weeks he will pay only interest on it, and that once the sale of the old house completes, he will make a lump sum overpayment equal to the excess of the sale proceeds over its loan debt, and at the same time convert the new loan from interest-only to repayment.

"Ronald Raygun" wrote

The OP said (see above): "... we pay it all back when we get the proceeds from our current house". I took the use of the word "all" to mean, well, err, "all"!!

"Ronald Raygun" wrote

I think there was - he said he wants a loan "for the purchase price of the new place", and that he will "pay it all back when we get the proceeds from our current house."

This suggests to me that it will be paid back from the original house's proceeds, rather than a third, conventional mortgage...

Yes, but what is "it"? I take "it" to be the temporary 5-week interest-only loan, which will be repaid *when* the old house is sold, using funds from two sources: (1) the sale proceeds minus the outstanding loan on the old house, (2) the "normal" mortgage on the new house, which will then replace the temporary loan.

Well, I think you're mistaken. I'm sure Keith will be able to confirm either way.