Bridging Loan info required, for purchase and sale in Scotland

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Finances / Finanzen » uk.finance » Bridging Loan info required, for purchase and sale in Scotland

Bridging Loan info required, for purchase and sale in Scotland [message #380182]

Sa, 15 April 2006 22:47

keithbrown53

Hi

On July 4th, we're hoping to buy a new house, which will cost around
=A3165K.

We have an offer on our current house, and will move out on Aug 4th,
giving us a month to tart up the new place.

This gives us a finance problem, which I am assuming can be solved by a
bridging loan.

Missives will be concluded on our sale prior to the loan being needed.

What can I expect to have to pay for this?

Regards,
Keith Brown.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380191 ]

So, 16 April 2006 09:38

Troy Steadman

keithbrown53 [at] hotmail.com wrote:
> Hi
>
> On July 4th, we're hoping to buy a new house, which will cost around
> =A3165K.
>
> We have an offer on our current house, and will move out on Aug 4th,
> giving us a month to tart up the new place.
>
> This gives us a finance problem, which I am assuming can be solved by a
> bridging loan.
>
> Missives will be concluded on our sale prior to the loan being needed.
>
> What can I expect to have to pay for this?
>
> Regards,
> Keith Brown.

The concept of "bridging loan" has disappeared from the High Street
banks in England. You have "loan" and "mortgage" which you justify on
your salary and secure on your house. No doubt a mortgage broker will
be able to find you a specialist lender, but for our "bridging loan" we
had to take out a 10 year mortgage topped up with 2 years of
repayments.

Cost?
5 1/2% variable, plus =A37-12k fees and costs, including solicitors and
redemption fees.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380209 ]

So, 16 April 2006 13:36

john boyle

In message <1145134062.553657.87820 [at] z34g2000cwc.googlegroups.com>,
keithbrown53 [at] hotmail.com writes
>Hi
>
>On July 4th, we're hoping to buy a new house, which will cost around
>£165K.
>
>We have an offer on our current house, and will move out on Aug 4th,
>giving us a month to tart up the new place.
>
>This gives us a finance problem, which I am assuming can be solved by a
>bridging loan.
>
>Missives will be concluded on our sale prior to the loan being needed.
>
>What can I expect to have to pay for this?

Bridging Loans are not seen so much these days. Banks will only do
'closed' bridging these days, i.e. if contracts have been exchanged (I
assume that you are in Scotland - does 'missives have been concluded'
mean that the transaction has passed an irrevocable stage?) and if they
are satisfied that you can afford to pay the interest on top of your
mortgage. The old clearing banks should be able to do it and would
charge 1 - 2% over base rate, plus a set up fee, typically 1%, plus
legal costs. The legal costs will depend on whether they rely on
solicitors' undertakings (dont know if these work in Scotland) or
require charges over one or both properties.

If the deal has not got past the irrevocable stage, then this is called
'open' bridging and Banks dont generally like these unless,
exceptionally, your income is such that using normal income multiples
(e.g. 3.5 x salary etc.,) you can justify a 100% mortgage on your new
house as well as your existing mortgage. If this is the case then almost
any mortgage lender will help you just be granting you an additional
mortgage on your new house which you will reduce or repay when your old
house is sold.
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380210 ]

So, 16 April 2006 13:37

john boyle

In message <1145173133.839454.255180 [at] e56g2000cwe.googlegroups.com>, Troy
Steadman <troysteadman [at] yahoo.co.uk> writes

>The concept of "bridging loan" has disappeared from the High Street
>banks in England. You have "loan" and "mortgage" which you justify on
>your salary and secure on your house. No doubt a mortgage broker will
>be able to find you a specialist lender, but for our "bridging loan" we
>had to take out a 10 year mortgage topped up with 2 years of
>repayments.
>
>Cost?
>5 1/2% variable, plus £7-12k fees and costs, including solicitors and
>redemption fees.
>

Had you exchanged contracts on both properties when you applied for the
loan?

(Those costs seem enormous!)
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380220 ]

So, 16 April 2006 16:35

Troy Steadman

john boyle wrote:
> In message <1145173133.839454.255180 [at] e56g2000cwe.googlegroups.com>, Troy
> Steadman <troysteadman [at] yahoo.co.uk> writes
>
> >The concept of "bridging loan" has disappeared from the High Street
> >banks in England. You have "loan" and "mortgage" which you justify on
> >your salary and secure on your house. No doubt a mortgage broker will
> >be able to find you a specialist lender, but for our "bridging loan" we
> >had to take out a 10 year mortgage topped up with 2 years of
> >repayments.
> >
> >Cost?
> >5 1/2% variable, plus =A37-12k fees and costs, including solicitors and
> >redemption fees.
> >
>
> Had you exchanged contracts on both properties when you applied for the
> loan?
>
> (Those costs seem enormous!)

No. This is to buy the other half of a residence I half own. Cost of
property =A3190k, + =A325k to improve it, + =A335k repayments and fees =3D
=A3250k (which I forgot to mention)

Interest only loan, and it's mainly the redemption fee, 3% in the first
year falling yearly by 1% to 0% in year 4.

3% of =A3250k =3D =A37,500
Arrangement fee =A31,250
Completion fee =A3400
Morgage broker =A32,500
Various other costs, solicitors etc =A31,300

Monthly repayments at 5 1/2% for 2 year =3D =A31,150, rising to 6 1/2% =3D
=A31,360 thereafter (variable).

Is that expensive?

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380221 ]

So, 16 April 2006 16:56

Troy Steadman

Troy Steadman wrote:
> john boyle wrote:
> > In message <1145173133.839454.255180 [at] e56g2000cwe.googlegroups.com>, Troy
> > Steadman <troysteadman [at] yahoo.co.uk> writes
> >
> > >The concept of "bridging loan" has disappeared from the High Street
> > >banks in England. You have "loan" and "mortgage" which you justify on
> > >your salary and secure on your house. No doubt a mortgage broker will
> > >be able to find you a specialist lender, but for our "bridging loan" we
> > >had to take out a 10 year mortgage topped up with 2 years of
> > >repayments.
> > >
> > >Cost?
> > >5 1/2% variable, plus =A37-12k fees and costs, including solicitors and
> > >redemption fees.
> > >
> >
> > Had you exchanged contracts on both properties when you applied for the
> > loan?
> >
> > (Those costs seem enormous!)
>
> No. This is to buy the other half of a residence I half own. Cost of
> property =A3190k, + =A325k to improve it, + =A335k repayments and fees =
=3D
> =A3250k (which I forgot to mention)
>
> Interest only loan, and it's mainly the redemption fee, 3% in the first
> year falling yearly by 1% to 0% in year 4.
>
> 3% of =A3250k =3D =A37,500
> Arrangement fee =A31,250
> Completion fee =A3400
> Morgage broker =A32,500
> Various other costs, solicitors etc =A31,300

Mind you, the solicitors fees are not a cost of the "bridging loan" .
There is:

1) Non-refundable application fee =A3520 (ouch!)
2) Legal fees to conveyancer =A3150
2) Redemption, admin, deeds handling fees =A3340 incl VAT

Total: =A31,000

> Monthly repayments at 5 1/2% for 2 year =3D =A31,150, rising to 6 1/2% =
=3D
> =A31,360 thereafter (variable).
>=20
> Is that expensive?

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380224 ]

So, 16 April 2006 18:15

john boyle

In message <1145198145.588231.134200 [at] u72g2000cwu.googlegroups.com>, Troy
Steadman <troysteadman [at] yahoo.co.uk> writes
>john boyle wrote:
>> In message <1145173133.839454.255180 [at] e56g2000cwe.googlegroups.com>, Troy
>> Steadman <troysteadman [at] yahoo.co.uk> writes
>>
>> >The concept of "bridging loan" has disappeared from the High Street
>> >banks in England. You have "loan" and "mortgage" which you justify on
>> >your salary and secure on your house. No doubt a mortgage broker will
>> >be able to find you a specialist lender, but for our "bridging loan" we
>> >had to take out a 10 year mortgage topped up with 2 years of
>> >repayments.
>> >
>> >Cost?
>> >5 1/2% variable, plus £7-12k fees and costs, including solicitors and
>> >redemption fees.
>> >
>>
>> Had you exchanged contracts on both properties when you applied for the
>> loan?
>>
>> (Those costs seem enormous!)
>
>No. This is to buy the other half of a residence I half own. Cost of
>property £190k, + £25k to improve it, + £35k repayments and fees =
>£250k (which I forgot to mention)
>
>Interest only loan, and it's mainly the redemption fee, 3% in the first
>year falling yearly by 1% to 0% in year 4.
>
>3% of £250k = £7,500
>Arrangement fee £1,250
>Completion fee £400
>Morgage broker £2,500
>Various other costs, solicitors etc £1,300
>
>Monthly repayments at 5 1/2% for 2 year = £1,150, rising to 6 1/2% =
>£1,360 thereafter (variable).
>
>Is that expensive?
>

Yes. Whoppingly so.

Why didnt the broker get you a deal with no early redemption penalty?
There are loads & Loads of them around.

Arrangement fee £1250!! That is a complete rip of. Typical arr fees are
£250-£350.

£2500 for the broker! That is MASSIVE! You should only have paid about
£300.

How did you eventually pay off the loan, by selling something else?
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380225 ]

So, 16 April 2006 18:16

john boyle

In message <1145199386.497421.171120 [at] i39g2000cwa.googlegroups.com>, Troy
Steadman <troysteadman [at] yahoo.co.uk> writes

>Mind you, the solicitors fees are not a cost of the "bridging loan" .

They will be if the 'bridging' lender wants its own legal charges on
both properties.

--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380227 ]

So, 16 April 2006 19:39

Troy Steadman

john boyle wrote:
> In message <1145198145.588231.134200 [at] u72g2000cwu.googlegroups.com>, Troy
> Steadman <troysteadman [at] yahoo.co.uk> writes
> >john boyle wrote:
> >> In message <1145173133.839454.255180 [at] e56g2000cwe.googlegroups.com>, Tr=
oy
> >> Steadman <troysteadman [at] yahoo.co.uk> writes
> >>
> >> >The concept of "bridging loan" has disappeared from the High Street
> >> >banks in England. You have "loan" and "mortgage" which you justify on
> >> >your salary and secure on your house. No doubt a mortgage broker will
> >> >be able to find you a specialist lender, but for our "bridging loan" =
we
> >> >had to take out a 10 year mortgage topped up with 2 years of
> >> >repayments.
> >> >
> >> >Cost?
> >> >5 1/2% variable, plus =A37-12k fees and costs, including solicitors a=
nd
> >> >redemption fees.
> >> >
> >>
> >> Had you exchanged contracts on both properties when you applied for the
> >> loan?
> >>
> >> (Those costs seem enormous!)
> >
> >No. This is to buy the other half of a residence I half own. Cost of
> >property =A3190k, + =A325k to improve it, + =A335k repayments and fees =
=3D
> >=A3250k (which I forgot to mention)
> >
> >Interest only loan, and it's mainly the redemption fee, 3% in the first
> >year falling yearly by 1% to 0% in year 4.
> >
> >3% of =A3250k =3D =A37,500
> >Arrangement fee =A31,250
> >Completion fee =A3400
> >Morgage broker =A32,500
> >Various other costs, solicitors etc =A31,300
> >
> >Monthly repayments at 5 1/2% for 2 year =3D =A31,150, rising to 6 1/2% =
=3D
> >=A31,360 thereafter (variable).
> >
> >Is that expensive?
> >
>
> Yes. Whoppingly so.
>
> Why didnt the broker get you a deal with no early redemption penalty?
> There are loads & Loads of them around.
>
> Arrangement fee =A31250!! That is a complete rip of. Typical arr fees are
> =A3250-=A3350.
>
> =A32500 for the broker! That is MASSIVE! You should only have paid about
> =A3300.
>
> How did you eventually pay off the loan, by selling something else?

This is happening now. I have no credit history (adverse or otherwise)
and insufficient income to support a normal mortgage.

The loan will be paid off by selling the house and buying a cheaper
one, probably this time next year. Since it is valued at =A3600 to 750k,
there is likely to be a big profit in it, but it has to be done very
quickly. The charges are high but I had the feeling 5 1/2% was low?

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380232 ]

So, 16 April 2006 20:49

john boyle

In message <1145209181.100029.266600 [at] j33g2000cwa.googlegroups.com>, Troy
Steadman <troysteadman [at] yahoo.co.uk> writes
>> Yes. Whoppingly so.
>>
>> Why didnt the broker get you a deal with no early redemption penalty?
>> There are loads & Loads of them around.
>>
>> Arrangement fee £1250!! That is a complete rip of. Typical arr fees are
>> £250-£350.
>>
>> £2500 for the broker! That is MASSIVE! You should only have paid about
>> £300.
>>
>> How did you eventually pay off the loan, by selling something else?
>
>This is happening now. I have no credit history (adverse or otherwise)
>and insufficient income to support a normal mortgage.
>
>The loan will be paid off by selling the house and buying a cheaper
>one, probably this time next year. Since it is valued at £600 to 750k,
>there is likely to be a big profit in it, but it has to be done very
>quickly.

Ahh, I understand now. Your situation isnt suitable for a bridging loan
at all, which is probably why you got turned down at the banks.

>The charges are high but I had the feeling 5 1/2% was low?
>

For a normal mortgage it is about average but there are many decent at
<5% with no penalties.

I can see that you needed a mortgage with no questions about income and
for those circs then the interest rate is about right, but the broker
fee was v.high.
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380233 ]

So, 16 April 2006 21:40

Troy Steadman

john boyle wrote:
> In message <1145209181.100029.266600 [at] j33g2000cwa.googlegroups.com>, Troy
> Steadman <troysteadman [at] yahoo.co.uk> writes
> >> Yes. Whoppingly so.
> >>
> >> Why didnt the broker get you a deal with no early redemption penalty?
> >> There are loads & Loads of them around.
> >>
> >> Arrangement fee =A31250!! That is a complete rip of. Typical arr fees =
are
> >> =A3250-=A3350.
> >>
> >> =A32500 for the broker! That is MASSIVE! You should only have paid abo=
ut
> >> =A3300.
> >>
> >> How did you eventually pay off the loan, by selling something else?
> >
> >This is happening now. I have no credit history (adverse or otherwise)
> >and insufficient income to support a normal mortgage.
> >
> >The loan will be paid off by selling the house and buying a cheaper
> >one, probably this time next year. Since it is valued at =A3600 to 750k,
> >there is likely to be a big profit in it, but it has to be done very
> >quickly.
>
> Ahh, I understand now. Your situation isnt suitable for a bridging loan
> at all, which is probably why you got turned down at the banks.
>
> >The charges are high but I had the feeling 5 1/2% was low?
> >
>
> For a normal mortgage it is about average but there are many decent at
> <5% with no penalties.
>
> I can see that you needed a mortgage with no questions about income and
> for those circs then the interest rate is about right, but the broker
> fee was v.high.

I arranged it through a Chartered Accountant, so I hope there's a
finder's fee for him included, otherwise that's something else to add
on! I don't pay professionals for their advice very often; when I do
I'm happy to pay them their going rate.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380237 ]

So, 16 April 2006 23:16

john boyle

In message <1145216448.843748.55320 [at] z34g2000cwc.googlegroups.com>, Troy
Steadman <troysteadman [at] yahoo.co.uk> writes

>> I can see that you needed a mortgage with no questions about income and
>> for those circs then the interest rate is about right, but the broker
>> fee was v.high.
>
>I arranged it through a Chartered Accountant, so I hope there's a
>finder's fee for him included, otherwise that's something else to add
>on! I don't pay professionals for their advice very often; when I do
>I'm happy to pay them their going rate.
>
I dont think there was a going rate. Anyway, you can rest assured that
if he dd get a fee, he should be offsetting that against the bill for
any work he does for you.
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380268 ]

Mo, 17 April 2006 17:47

keithbrown53

For info, I have now contacted my lender, Scottish Widows Bank, who
were very helpful.

It would appear that "bridging loans" are indeed no more.

However, they are prepared to give us an interest only mortgage for 5
weeks, for the purchase price of the new place (160 - 170K), at their
standard variable rate (4.94%), with no set up fees, and no redemption
fees when we pay it all back when we get the proceeds from our current
house.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380272 ]

Mo, 17 April 2006 18:07

Tim

<keithbrown53 [at] hotmail.com> wrote
> However, they are prepared to give us an
> interest only mortgage for 5 weeks, for the
> purchase price of the new place (160 - 170K), ...
> ...
> ... and no redemption fees when we pay it all back
> when we get the proceeds from our current house.

Do you not currently have a
mortgage on the current house?

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380288 ]

Mo, 17 April 2006 19:51

john boyle

In message <1145288857.266485.292800 [at] g10g2000cwb.googlegroups.com>,
keithbrown53 [at] hotmail.com writes
>For info, I have now contacted my lender, Scottish Widows Bank, who
>were very helpful.
>
>It would appear that "bridging loans" are indeed no more.
>
>However, they are prepared to give us an interest only mortgage for 5
>weeks, for the purchase price of the new place (160 - 170K), at their
>standard variable rate (4.94%), with no set up fees, and no redemption
>fees when we pay it all back when we get the proceeds from our current
>house.
>
Brilliant!
--
John Boyle

Re: Bridging Loan info required, for purchase and sale in Scotland [message #380307 ]

Mo, 17 April 2006 22:12

keithbrown53

We do, but have enough savings that we were able to convince them we
could pay both loans for the period required.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #382730 ]

Di, 18 April 2006 10:44

Tim

> > <keithbrown53 [at] hotmail.com> wrote
> > > However, they are prepared to give us an
> > > interest only mortgage for 5 weeks, for the
> > > purchase price of the new place (160 - 170K), ...
> > > ...
> > > ... and no redemption fees when we pay it all back
> > > when we get the proceeds from our current house.
> >
> "Tim" wrote
> > Do you not currently have a
> > mortgage on the current house?
> >
<keithbrown53 [at] hotmail.com> wrote
> We do, but have enough savings that we
> were able to convince them we could
> pay both loans for the period required.

As the proceeds of the current house are enough to
pay off the earlier mortgage *and* the new mortgage,
then it appears that you wouldn't have needed
a "bridging" loan anyway -- you could just have
re-mortgaged the first house for a higher amount?

[Just for the 5 weeks, ie you would have
made sure it didn't have any "tie-ins"!]

Re: Bridging Loan info required, for purchase and sale in Scotland [message #382734 ]

Di, 18 April 2006 12:23

Ronald Raygun

Tim wrote:

>> > <keithbrown53 [at] hotmail.com> wrote
>> > > However, they are prepared to give us an
>> > > interest only mortgage for 5 weeks, for the
>> > > purchase price of the new place (160 - 170K), ...
>> > > ...
>> > > ... and no redemption fees when we pay it all back
>> > > when we get the proceeds from our current house.
>> >
>> "Tim" wrote
>> > Do you not currently have a
>> > mortgage on the current house?
>> >
> <keithbrown53 [at] hotmail.com> wrote
>> We do, but have enough savings that we
>> were able to convince them we could
>> pay both loans for the period required.
>
> As the proceeds of the current house are enough to
> pay off the earlier mortgage *and* the new mortgage,

I don't think there is evidence support that conclusion.

> then it appears that you wouldn't have needed
> a "bridging" loan anyway -- you could just have
> re-mortgaged the first house for a higher amount?
>
> [Just for the 5 weeks, ie you would have
> made sure it didn't have any "tie-ins"!]

I think "We have enough savings that ... we could pay
both loans for the period" means that the savings are
sufficient *to service* the new loan (the existing old
loan being serviced from income as usual, but the sum of
the two loans being well in excess of what the "income
multiples" rule would permit).

There was no suggestion that his savings plus equity could
completely fund the purchase of the second house.

I think what Keith is saying is that the lender is happy
to lend him the full purchase price of the new house, on
the understanding that for the first 5 weeks he will pay
only interest on it, and that once the sale of the old
house completes, he will make a lump sum overpayment equal
to the excess of the sale proceeds over its loan debt, and
at the same time convert the new loan from interest-only
to repayment.

Re: Bridging Loan info required, for purchase and sale in Scotland [message #382761 ]

Mi, 19 April 2006 07:33

keithbrown53

Ronald's interpretation is correct. I'm sure I could have phrased the
question more clearly.

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