Can someone please explain bridging loans


M

Mike Mitchell

Can someone please explain bridging loans: what they are, how they
work, how much they cost, when they are paid back, and pitfalls.

MM
 
Ad

Advertisements

G

GSV Three Minds in a Can

from the said:
Can someone please explain bridging loans: what they are, how they
work, how much they cost, when they are paid back, and pitfalls.
They are (usually) a short term mortgage or second (or third) mortgage,
made so you can buy a new house before you sold the old one. What they
cost depends on who you get them from and how good your security is.
Typically more than a mortgage but less than an overdraft/unsecured
loan/etc. They are normally paid back when the property you are trying
to sell finally sells, or when some other foreseen chunk of capital
shows up.

The main pitfall is that you may be signing up for an open ended
commitment. If you house has already sold and you just won't get the
money in time to complete on the new one, no problem, you know what you
are liable for. If your house has only 'nearly sold' and the buyer pulls
out, you now have two houses and two large mortgages (or a mortgage and
a bridging loan) for some unknown period of time. Not for people who
worry a lot. 8>.

So why did you want to know - not a homework project I trust?

BT,DT,GtTS.
 
D

Doug Ramage

GSV Three Minds in a Can said:
They are (usually) a short term mortgage or second (or third) mortgage,
made so you can buy a new house before you sold the old one. What they
cost depends on who you get them from and how good your security is.
Typically more than a mortgage but less than an overdraft/unsecured
loan/etc. They are normally paid back when the property you are trying to
sell finally sells, or when some other foreseen chunk of capital shows up.
Probably true for a "closed" bridge. But nearer 1% per *month* for an "open"
bridge.

Banks only tend to do the former.
 
M

Mike Mitchell

They are (usually) a short term mortgage or second (or third) mortgage,
made so you can buy a new house before you sold the old one. What they
cost depends on who you get them from and how good your security is.
Typically more than a mortgage but less than an overdraft/unsecured
loan/etc. They are normally paid back when the property you are trying
to sell finally sells, or when some other foreseen chunk of capital
shows up.

The main pitfall is that you may be signing up for an open ended
commitment. If you house has already sold and you just won't get the
money in time to complete on the new one, no problem, you know what you
are liable for. If your house has only 'nearly sold' and the buyer pulls
out, you now have two houses and two large mortgages (or a mortgage and
a bridging loan) for some unknown period of time. Not for people who
worry a lot. 8>.

So why did you want to know - not a homework project I trust?
An agent suggested it to me, as I had expressed interest in a
property, but cannot proceed until I have a buyer for mine (which is
worth considerably more).

MM
 
Ad

Advertisements

G

GSV Three Minds in a Can

from the said:
An agent suggested it to me, as I had expressed interest in a
property, but cannot proceed until I have a buyer for mine (which is
worth considerably more).
I've done it twice .. (both open bridges). It's pretty nerve wracking,
but if you really, really want the new property and you can get a decent
rate out of your bank (or whoever) it may be worth it. Note that if you
have other assets you can offer up tot he bank (stocks, shares,
whatever) you may be able to get a better rate .. last time I was
shopping I was offered something around 1.5% over base rate, iirc, which
I thought was pretty good for an open ended bridging loan, although
eventually my company sprang for a relocation package which cost me even
less (just some tax).
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top