Bridging loans... for and against
Discussion
Looking for some advice.
A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
We’re in the same boat. Dream house came up and we bought it before ours is sold and thought - sod it.
We should exchange in a week on our old one but also know it’s possible it might not.
We took a mortgage on the new house to bridge as equity is tied up in old house which will have us mortgage free.
We went for an hsbc mortgage tracker with no redemption penalty. We haven’t made a payment yet and may pay it off next month in full with no penalty once the old house is sold.
Could they just get put a mortgage on theirs in Scotland like we have temporarily?
They can’t mortgage the Cheshire one as it t wil come up as being for sale.
We should exchange in a week on our old one but also know it’s possible it might not.
We took a mortgage on the new house to bridge as equity is tied up in old house which will have us mortgage free.
We went for an hsbc mortgage tracker with no redemption penalty. We haven’t made a payment yet and may pay it off next month in full with no penalty once the old house is sold.
Could they just get put a mortgage on theirs in Scotland like we have temporarily?
They can’t mortgage the Cheshire one as it t wil come up as being for sale.
Edited by interstellar on Wednesday 30th August 13:03
Bridging loans are very expensive at the moment.
Friend just took one out for a development he is planning on doing - APR (after fees and broker cut etc) ends up close to 20% - One off fees making up a chunk of this.
Might be better discounting the Cheshire cottage for a quick sale.
Edited to add - If they can get a regular mortgage (as the poster above) that may be the best option, although being both retired will not make this easy.
Friend just took one out for a development he is planning on doing - APR (after fees and broker cut etc) ends up close to 20% - One off fees making up a chunk of this.
Might be better discounting the Cheshire cottage for a quick sale.
Edited to add - If they can get a regular mortgage (as the poster above) that may be the best option, although being both retired will not make this easy.
Edited by Wilmslowboy on Wednesday 30th August 12:42
Wacky Racer said:
Looking for some advice.
A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
Have they looked into the whole stamp duty situation up there? And council tax. Double for the latter and much higher for the former if this new home is classified as a second home. A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
How do hey stop this second home becoming classified as a second home for these purposes?
If the Scottish property is bought before the English one is sold, how does the Scottish one avoid becoming subject to all these additional costs? By moving into it immediately, leaving the English home empty while it is sold, perhaps?
dxg said:
Wacky Racer said:
Looking for some advice.
A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
Have they looked into the whole stamp duty situation up there? And council tax. Double for the latter and much higher for the former if this new home is classified as a second home. A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
How do hey stop this second home becoming classified as a second home for these purposes?
If the Scottish property is bought before the English one is sold, how does the Scottish one avoid becoming subject to all these additional costs? By moving into it immediately, leaving the English home empty while it is sold, perhaps?
There is a 18 month period given if you sell one of the properties in that time you can claim back the higher duty paid.
https://revenue.scot/taxes/land-buildings-transact...
Wacky Racer said:
Looking for some advice.
A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
Rent it out, take a BTL mortgage against it, with no or low ERC's, to release funds in the meantime, put it back up for sale next summer or later if renting suits.......A close friend and his wife, (Who are both retired) have just bought a very nice bungalow with lovely gardens up in Scotland for around £300,000 (Didn't need a mortgage)
They have a nice cottage in Cheshire worth around £370-£400k which is also owned outright.
There was a sale going through on their Cheshire home, but as often happens it fell through at the very last minute (A chain collapsed) and they were banking on this money to help fund their retirement.
The Cheshire house is empty and unfurnished at the moment, it is up for sale atm, and they have had five viewers in a month.
I did advise him not to buy the Scottish home, before the sale of theirs was in the bag, but he was convinced it was going to go through.
They do have a decent amount of savings, but they are not going to last forever.
Worst case scenario would a bridging loan be the answer, the house in Cheshire is very nice, but it may take a few months to sell.
Or are there any other options.?
Cheers.
They should probably work backwards... what's their cash burn rate, and what does that equate to in terms of how long their savings will last. That'll help them decide how urgent it really is to get access to more cash.
That said, if they want more liquid cash, a BL seems like a very expensive way to feel better about having more liquidity than they need.
Probably better to progressively discount as they get closer to actually needing cash and/or making it clear to the agents that there is a discount available for a bona fide cash buyer who isn't going to mess them around?
Either option has a cost, either in interest paid or discount given, but the thing with a discount is that you know where the final bill will end up once you've agreed the transaction. If they take the BL they may well find that in the current market it takes time and they still need to discount to get it sold. It's also easy to see someone not wanting to drop the price, even if it's necessary, because of how much the BL has cost them and ending up even worse off as a result.
That said, if they want more liquid cash, a BL seems like a very expensive way to feel better about having more liquidity than they need.
Probably better to progressively discount as they get closer to actually needing cash and/or making it clear to the agents that there is a discount available for a bona fide cash buyer who isn't going to mess them around?
Either option has a cost, either in interest paid or discount given, but the thing with a discount is that you know where the final bill will end up once you've agreed the transaction. If they take the BL they may well find that in the current market it takes time and they still need to discount to get it sold. It's also easy to see someone not wanting to drop the price, even if it's necessary, because of how much the BL has cost them and ending up even worse off as a result.
tighnamara said:
You pay the higher stamp duty (having second property) , presuming the OP has already / or near to paying this, and claim back after selling one of the properties
There is a 18 month period given if you sell one of the properties in that time you can claim back the higher duty paid.
https://revenue.scot/taxes/land-buildings-transact...
Excellent. Cheers!There is a 18 month period given if you sell one of the properties in that time you can claim back the higher duty paid.
https://revenue.scot/taxes/land-buildings-transact...
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