Giving a house purchaser a bridging loan – mad idea?
Discussion
Estate agent looked at me as if I was mad! But just trying to think out the box to help lever equity that will help a house sale and work better than a Purchase Lease Option.
So, house I’m selling has no mortgage and no chain. Prospective purchaser has cash but also needs to sell two smaller (unmortgaged) houses. So, I could take half now and agree to have the balance in six months. If they don’t have the balance by then an escalating base rate Interest (or rent) could be triggered after 6 months.
But why would I give a ‘free’ 6 month bridging loan to help secure the sale? Well because I secure the sale, bypass her chain, offload the property maintenance and if I get half the funds upfront I save £1500 a month on my own outgoings. Bit of a no brainer!
The key consideration when writing the legal agreement is any risk in registering the title on a property as tenants in common. Also stamp duty implications on a split/part/delayed purchase?
Will need solid advice and agreements drawn but any thoughts pointers welcome as I’d love this person and her family to get the house – she was mates with my Mum who lived there and was a good mate at school
Cheers
So, house I’m selling has no mortgage and no chain. Prospective purchaser has cash but also needs to sell two smaller (unmortgaged) houses. So, I could take half now and agree to have the balance in six months. If they don’t have the balance by then an escalating base rate Interest (or rent) could be triggered after 6 months.
But why would I give a ‘free’ 6 month bridging loan to help secure the sale? Well because I secure the sale, bypass her chain, offload the property maintenance and if I get half the funds upfront I save £1500 a month on my own outgoings. Bit of a no brainer!
The key consideration when writing the legal agreement is any risk in registering the title on a property as tenants in common. Also stamp duty implications on a split/part/delayed purchase?
Will need solid advice and agreements drawn but any thoughts pointers welcome as I’d love this person and her family to get the house – she was mates with my Mum who lived there and was a good mate at school
Cheers
I would imagine most if not all solicitors would probably caution you against trying to do this.
You might think you have sold your house but in reality you have only sold half of it and I’m not sure I’d want the stress of wondering whether or not the other half of cash would actually materialise.
Yes you could build in interest charges but again personally if I was to do that I’d be doing it from day 1.
Personally I wouldn’t be doing it and would look for another buyer.
You might think you have sold your house but in reality you have only sold half of it and I’m not sure I’d want the stress of wondering whether or not the other half of cash would actually materialise.
Yes you could build in interest charges but again personally if I was to do that I’d be doing it from day 1.
Personally I wouldn’t be doing it and would look for another buyer.
Thanks for the feedback - genuinely appreciated.
I do know not to mix business & pleasure, but retaining HALF the house in my name whilst waiting for the balance to be paid IS a big security, no? Obvs not a hassle free squeaky clean one but surely words can be written...?
Her taking a regular bridging loan will likely be cost prohibitive and mean there can be no sale and no deal for min 6 months plus I'm stuck in a chain that can snap at anytime to boot. I need to shift this property by now, and its an unique property at a terrible time so footfall is low...
Sounds like I'm overreaching though - cheers.,
I do know not to mix business & pleasure, but retaining HALF the house in my name whilst waiting for the balance to be paid IS a big security, no? Obvs not a hassle free squeaky clean one but surely words can be written...?
Her taking a regular bridging loan will likely be cost prohibitive and mean there can be no sale and no deal for min 6 months plus I'm stuck in a chain that can snap at anytime to boot. I need to shift this property by now, and its an unique property at a terrible time so footfall is low...
Sounds like I'm overreaching though - cheers.,
Definitely a mad idea. Do a property swap with cash adjustment as necessary, then the 'deal' which you are after is done and neither party is reliant on the other for any length of time. Obvs dependent on the two properties being in reasonable condition and readily marketable so straightforward to sell.
Ken Figenus said:
I do know not to mix business & pleasure, but retaining HALF the house in my name whilst waiting for the balance to be paid IS a big security, no? Obvs not a hassle free squeaky clean one but surely words can be written...?
Don’t do that.Either rent it to her in the interim (I wouldn’t do that) or find a way to lend the money with a charge (ideally over all three properties).
Key is locking in the transaction value and transferring title in a way that isn’t going to have sdlt/legal complexity yet giving you some security.
Also think through what happens if the value of the other two properties being sold falls…
Cheers for the continued input guys.
Renting is a total PITA proposition - even though I am an accredited registered landlord. I'd need to get an EICR on a house rewired in the 70's etc Regs in Wales means its a minimum 12 month initial tenancy. Lots to dissuade renting out these days.
Renting is a total PITA proposition - even though I am an accredited registered landlord. I'd need to get an EICR on a house rewired in the 70's etc Regs in Wales means its a minimum 12 month initial tenancy. Lots to dissuade renting out these days.
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