Bridging finance to complete a house purchase?

mikeysthoughts

Well-known Member
Hi fellow AV'ers,

Has anyone used short term bridging finance to complete a house purchase? Any thoughts or specific things to be aware of? What surprises are there?

For us it would be an insurance policy in case a property sale fell through. From what I can divine from Google, there are pros and cons:

Pros:
-Relatively quick to arrange and slightly easier to access vs. a standard mortgage.
- Don't repay until finances from separate house purchase are completed

Cons:
- More expensive than other forms of lending
- Legally slightly more effort to arrange and places a charge against the new property

Despite my superb credit rating, for various reasons a mortgage or personal loan is not available to me right now. I haven't found a p2p lender that would lend as much as we would need.
Cheers,
Mike
 

nick67

Well-known Member
We looked into it a number of years ago and found it to be expensive and a hassle. We ended up keeping house 1 and switch to a buy to let mortgage that allowed us to release enough money to buy house 2. We then sold house 1 18 months later.
 

ashenfie

Well-known Member
Ive notice houses for sale in my area, which has not been the case of many years. This indicates to me a sluggish market.

My Parents had one years ago and its basically ok if all goes well. If a buyer pulls out and you have to wait for another it can cause a lot of stress in an already stressful process.
 

leo79

Well-known Member
What @ashenfie said.

My brother had one a few years ago and as long as everything works out time wise then they are fine. It only takes one hiccup though and they can end up being a nightmare and very expensive.

He had a mortgage on a house he lived in which he was selling, he'd put an offer in on another house which he fell in love with but he needed to sell his rental to afford it. So basically 3 house sales with a chain for each house. The total chain for all 3 houses was 12 and kept getting delayed so in the end he took out a bridging loan while the sale was going through. I personally wouldn't have took the risk with so many people involved. But it worked out fine in the end.
 

mikeysthoughts

Well-known Member
What @ashenfie said.

My brother had one a few years ago and as long as everything works out time wise then they are fine. It only takes one hiccup though and they can end up being a nightmare and very expensive.

He had a mortgage on a house he lived in which he was selling, he'd put an offer in on another house which he fell in love with but he needed to sell his rental to afford it. So basically 3 house sales with a chain for each house. The total chain for all 3 houses was 12 and kept getting delayed so in the end he took out a bridging loan while the sale was going through. I personally wouldn't have took the risk with so many people involved. But it worked out fine in the end.
Phew, that's one Sir Fergy would have called "squeaky bum time".

Thanks all for the input. I'm hopeful that our house exchange will take place fairly quickly and that no finance will be needed, but I I'll retain the option as insurance.
 

mh123

Active Member
Do NOT rely on a 'decision in principle' especially if you are doing anything out of the ordinary such as moving from England to Scotland.

Because of the differences in the English and Scottish systems, i.e. being contractually committed to a completion date, we thought we had pre-arranged a bridging loan if needed as an insurance policy in case of delays with our sale chain. Went through the whole application / vetting process - thankfully didn't part with any cash for brokers fees or anything.

When our sale chain collapsed two weeks prior to the committed date to take over the Scottish house we had no choice but to invoke the bridge, only for the underwriter to then immediately refuse the loan because of too many legal differences to overcome between the two systems. When I dug deeper, the underwriter explained some of the complexities and even when I offered to pay the additional legal costs (about £4k was estimated) they still refused. A mad dash series of applications to other lenders produced the same outcome - at one point I was even told it would be easier to bridge between England and Afghanistan than England and Scotland!

In the end we went into breach of contract with our Scottish purchase for 6 weeks whilst the chain was restored and our sale completed - thankfully the person moving out was going into rented (older person) and was perfectly lovely about it - we had to cover all her costs in the meantime - rent, insurance, utilities, out-of-pocket additional legals and so on - but it could have been disastrously different if there was an upward chain we were joining as we could have been responsible for so much more. In the end it cost about £1k in extras which was way below the £2.5k it would have cost simply to instigate the bridge before any interest was added.

That was the scariest few months of my life!
 

mikeysthoughts

Well-known Member
Do NOT rely on a 'decision in principle' especially if you are doing anything out of the ordinary such as moving from England to Scotland.

Because of the differences in the English and Scottish systems, i.e. being contractually committed to a completion date, we thought we had pre-arranged a bridging loan if needed as an insurance policy in case of delays with our sale chain. Went through the whole application / vetting process - thankfully didn't part with any cash for brokers fees or anything.

When our sale chain collapsed two weeks prior to the committed date to take over the Scottish house we had no choice but to invoke the bridge, only for the underwriter to then immediately refuse the loan because of too many legal differences to overcome between the two systems. When I dug deeper, the underwriter explained some of the complexities and even when I offered to pay the additional legal costs (about £4k was estimated) they still refused. A mad dash series of applications to other lenders produced the same outcome - at one point I was even told it would be easier to bridge between England and Afghanistan than England and Scotland!

In the end we went into breach of contract with our Scottish purchase for 6 weeks whilst the chain was restored and our sale completed - thankfully the person moving out was going into rented (older person) and was perfectly lovely about it - we had to cover all her costs in the meantime - rent, insurance, utilities, out-of-pocket additional legals and so on - but it could have been disastrously different if there was an upward chain we were joining as we could have been responsible for so much more. In the end it cost about £1k in extras which was way below the £2.5k it would have cost simply to instigate the bridge before any interest was added.

That was the scariest few months of my life!
OUCH! Thankfully I will remain within England and in light of the above I'll run it all past my solicitor to fully understand the risks and challenges.

Glad yours all worked out in the end, sort of! Thanks for your input.
 

mh123

Active Member
I'll run it all past my solicitor to fully understand the risks and challenges.
Definitely worth doing, although I have to say that as soon as I mentioned bridging to my solicitor there was a sharp intake of breath followed quickly by a warning that it would significantly increase the amount of work for him - which obviously meant significantly more cost for me!

Good luck!

One thing's for sure - until/unless they change the crazy system in England I'm never going to be buying down there again!
 

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