confused re bridging loans

I thought that a bridging loan was only given to bridge between two completion dates that were already defined. i.e. you exchange of both contracts together and the bridgling loan covers the well-defined period between you completing the purchase of the next house and completing the sale of the current house. usually you complete both on the same day so a BL is not needed.

Open ended bridges, where only the purchase conrtract is exchanged and you end up paying your existign mortgage plus the bridging loan, used to be very hard to get and are, I guess, impossible now.

Robert

Is it? I would have thought that the only thing which distinguishes a bridging loan from a normal mortgage loan is the fact that the two combined loans (on the old and new property) exceed the usual lending limit based on income multiples. The increased risk is reflected in an enhanced interest rate. Provided that the larger of the two loans is within your limit, and if the same lender is giving both loans, they might agree to charge the higher rate on the lower loan (which would typically be the old house).

Or the new lender might charge the normal mortgage interest rate on that portion of the new loan which keeps your total borrowing below the limit, and thehigher rate on the excess. To that extent, the bridging rate is based on the new house. AFAIAA the old loan just stays as it was, and it is expected that *its* mortgage will be redeemed when it sells, and if (as ought to be the case!) the sale proceeds of the old house exceed what was owed on it, the excess is used to reduce the balance outstanding on the new loan.

You can't just say "end of contract" and wash your hands of everything. If you give the bank the keys, they will sell the old house at auction and will probably get less for it than you would have done if only you had had more patience and/or had been prepared to drop the asking price.

If the auction sale realises less than you owe the bank on the first loan, you will still owe the bank the rest. If there is then enough equity in the other house, and enough capacity in your income multiples limit, they may agree to absorb the difference within the other loan.

Either way, the money will need to be repaid, and the T&Cs of the loans involved will govern the timescales and the consequences of not sticking to them.

Yes it is risky. Sell the old house first, then buy a new one. If the loan/value ratios are high enough to represent a high risk of leading to trouble in the event of prices dropping, or of causing you embarrassment in terms of being able to afford to keep the payments going if interest rates rise, then chances are no lender would agree to give a bridging loan anyway.

Bridging loans are always risky. Negative equity is something to think about - I think most mortgages allow them to ask for immediate payment to bring the mortgage out of NE.

Yes it is risky. Sell the old house first, then buy a new one. Very good advice thank you so much