House selling and buying nightmare and bridging loans?

PVO_Dave

Having a nightmare at the moment with our house sale and purchase, everything started brilliantly, house sold within 4 days of being on the market, we found somewhere, put an offer in and then two weeks later the buyers buyer dropped out - stupid ass reason, but besides the point I guess.

The agents did some stealth re-marketing and another interested party was now in a position to offer, so we re-sold again the same day!

Two weeks later... the new buyers buyer has dropped out, for yet again reasons of them being dumb.

We've given the agent a few days to see if they can re-sell the either of the places for the people that want to buy ours, otherwise we've got to remarket our place and hope that the people we are buying from will give us a few weeks to turn it around (we've already done the survey, got our offer and nearly finished the searches!).

A colleague of mine mentioned a bridging loan as a last resort option so we don't lose the place, it's obviously fairly drastic and carries quite a lot of risk (I.e. how long will I be paying 2x mortgages + interest on said bridging loan), but the house we are buying is in high demand and really won't last long if remarketed too. I've asked my broker to knock up some figures for me.

Anyone ever done it and took the risk? I have some savings we had earmarked for a conservatory or similar which could cover us for a good few months, but probably not the best way to spend money. Not in a position equity wise where we could buy to let our currently place, as I've explored that already.

munckee

I've never done it, however I used to work in a bank and someone asked me about one once, the old sage of a bank manager who had been in banking for 30 plus years said "in my entire career no one has ever ended up pleased they took out a bridging loan." 

End of my 'wisdom'!!

TTony

I'd not do it.

As you say, there's a big risk attaching, so unless there's something really special about the place you're wanting, I'd  be looking at other options.

If you need to, drop the price on yours to get it sold double quick.

If it's unsold for a while, you could consider renting it out, but that's a whole other set of risks.

Ultimately, it depends on how "special" the new place is, how at risk you are of losing it if you don't get yours sold, and whether you can cover 6-9 mths (thinking worst case ) of bridging loan interest and double mortgage costs, on top of all the other costs of moving house.

ICBM

munckee said:

I've never done it, however I used to work in a bank and someone asked me about one once, the old sage of a bank manager who had been in banking for 30 plus years said "in my entire career no one has ever ended up pleased they took out a bridging loan."

Wrong. I've done it both times I've ever bought a house, and am very pleased about it. I don't see the issue or risk - and nor should the bank, since if it all went wrong you still have the value of the two houses to pay off the debt. As long as you can cover both mortgages and the bridging loan interest in the short term, of course.

In fact I would prefer to do it, rather than risk this nonsense of 'chains' which can be broken by someone two or three - or even more - links further away, leaving you with a major problem. One of the reasons I am pleased is exactly that one of them did go partially wrong causing a delay, and if we hadn't already had the bridging loan in place we would have been faced with either being without a house for two weeks or breaking the chain.

munckee

ICBM said:

munckee said:

I've never done it, however I used to work in a bank and someone asked me about one once, the old sage of a bank manager who had been in banking for 30 plus years said "in my entire career no one has ever ended up pleased they took out a bridging loan."

Wrong. I've done it both times I've ever bought a house, and am very pleased about it. I don't see the issue or risk - and nor should the bank, since if it all went wrong you still have the value of the two houses to pay off the debt. As long as you can cover both mortgages and the bridging loan interest in the short term, of course.

In fact I would prefer to do it, rather than risk this nonsense of 'chains' which can be broken by someone two or three - or even more - links further away, leaving you with a major problem. One of the reasons I am pleased is exactly that one of them did go partially wrong causing a delay, and if we hadn't already had the bridging loan in place we would have been faced with either being without a house for two weeks or breaking the chain.

Like I say never had one.  I can see the short term attraction, I think what the bank chap was referring to was the reasonably foreseeable circumstances where the short term becomes the long term and people get in trouble.

Clearly its worked for you, if I was looking into this I would be swayed that someone who has seen many bridging loans suggests they are a bad idea and stay away, I'm fairly risk averse financially though.  I'd rather miss out on the house.

shuikit

We were nearly in a situation where we were going to buy a new house before selling the current one.  One option we looked briefly into was changing the current house mortgage to a buy to let, taking what remaining equity out of the current house as the deposit for the new one.  We would have then sold the current house.  Obviously, it depends on how much equity is in your current house, we didn't go down this route, partly as the numbers felt a bit too tight to be comfortable.

PVO_Dave

Thanks for the input so far!

Only reason we are considering it is really down to the house, to get something as nice (it's slim pickings at the moment) we are looking at an extra 25-50k than we'd need for this place. I'm sure we'd 'get over it' if we lost this place, but we'd end up with a bigger mortgage, but it's offsetting that against the money I'd have to pay out keeping two mortgages going plus the interest.

Our current house is priced well, sold within 4 days of advertising and then re-sold in the same day when the first time burglar let us down, but that could have been just good luck, hard to know.

I'm normally quite risk averse  

Fretwired

PVO_Dave said:

Thanks for the input so far!

Only reason we are considering it is really down to the house, to get something as nice (it's slim pickings at the moment) we are looking at an extra 25-50k than we'd need for this place. I'm sure we'd 'get over it' if we lost this place, but we'd end up with a bigger mortgage, but it's offsetting that against the money I'd have to pay out keeping two mortgages going plus the interest.

Our current house is priced well, sold within 4 days of advertising and then re-sold in the same day when the first time burglar let us down, but that could have been just good luck, hard to know.

I'm normally quite risk averse  

Burglar??

Be wary of bridging loans - they carry higher interest rates and penalties. Read the small print. I run a local business group and our independent mortgage adviser can provide bridging finance but he usually tries to talk people out of it. He tells some horror stories .. houses that don't sell for two years etc.

PVO_Dave

Fretwired said:

PVO_Dave said:

Thanks for the input so far!

Only reason we are considering it is really down to the house, to get something as nice (it's slim pickings at the moment) we are looking at an extra 25-50k than we'd need for this place. I'm sure we'd 'get over it' if we lost this place, but we'd end up with a bigger mortgage, but it's offsetting that against the money I'd have to pay out keeping two mortgages going plus the interest.

Our current house is priced well, sold within 4 days of advertising and then re-sold in the same day when the first time burglar let us down, but that could have been just good luck, hard to know.

I'm normally quite risk averse  

Burglar??

Be wary of bridging loans - they carry higher interest rates and penalties. Read the small print. I run a local business group and our independent mortgage adviser can provide bridging finance but he usually tries to talk people out of it. He tells some horror stories .. houses that don't sell for two years etc.

Looks a bit out of context there, 'time burglar' - had 4 weeks robbed from me so far.

Definitely some big risk involved if things go south! 

richardhomer

I doubt you’d find bridging loans are freely available these days - and I’d certainly not recommend one. It usually less costly to take a hit on your selling price....

Dominic

ICBM said:

munckee said:

I've never done it, however I used to work in a bank and someone asked me about one once, the old sage of a bank manager who had been in banking for 30 plus years said "in my entire career no one has ever ended up pleased they took out a bridging loan."

Wrong. I've done it both times I've ever bought a house, and am very pleased about it. I don't see the issue or risk - and nor should the bank, since if it all went wrong you still have the value of the two houses to pay off the debt. As long as you can cover both mortgages and the bridging loan interest in the short term, of course.

In fact I would prefer to do it, rather than risk this nonsense of 'chains' which can be broken by someone two or three - or even more - links further away, leaving you with a major problem. One of the reasons I am pleased is exactly that one of them did go partially wrong causing a delay, and if we hadn't already had the bridging loan in place we would have been faced with either being without a house for two weeks or breaking the chain.

Absolutely correct ICBM ....what difference a bridge or mortgages on a couple of properties when everybody who can scrambles to acquire buy-to -lets........business Empires were built by risk-takers ,of course, there is a potential downside but interest rates are relatively low, the market isn't as strong as it could be and may slip very slightly but the money is still invested and secured in residential real estate which is relatively stable.
 There is the question of interest but the arrangement fee is probably more punitive however this could perhaps be slightly mitigated by the fact that you will be able to proceed rapidly and can perhaps re-negotiate to chip a bit off your purchase .
 WARNING ; you have lost 2 buyers.....you say silly reasons .......be analytical ........be sure that there is no real impediment to selling i.e. a serious issue that keeps cropping up on buyer's surveys, a title irregularity or anything else that will genuinely cause real resistance to a sale going through cleanly.

JezWynd

Aren't bridging loans quite costly? What happens if your house fails to sell for 6 months, it's not unknown. I'd rather do it another way - sell your property and move into temp accomodation, you then become a cash buyer with all the advantages that brings.

PVO_Dave

Dominic said:

ICBM said:

munckee said:

I've never done it, however I used to work in a bank and someone asked me about one once, the old sage of a bank manager who had been in banking for 30 plus years said "in my entire career no one has ever ended up pleased they took out a bridging loan."

Wrong. I've done it both times I've ever bought a house, and am very pleased about it. I don't see the issue or risk - and nor should the bank, since if it all went wrong you still have the value of the two houses to pay off the debt. As long as you can cover both mortgages and the bridging loan interest in the short term, of course.

In fact I would prefer to do it, rather than risk this nonsense of 'chains' which can be broken by someone two or three - or even more - links further away, leaving you with a major problem. One of the reasons I am pleased is exactly that one of them did go partially wrong causing a delay, and if we hadn't already had the bridging loan in place we would have been faced with either being without a house for two weeks or breaking the chain.

Absolutely correct ICBM ....what difference a bridge or mortgages on a couple of properties when everybody who can scrambles to acquire buy-to -lets........business Empires were built by risk-takers ,of course, there is a potential downside but interest rates are relatively low, the market isn't as strong as it could be and may slip very slightly but the money is still invested and secured in residential real estate which is relatively stable.
 There is the question of interest but the arrangement fee is probably more punitive however this could perhaps be slightly mitigated by the fact that you will be able to proceed rapidly and can perhaps re-negotiate to chip a bit off your purchase .
 WARNING ; you have lost 2 buyers.....you say silly reasons .......be analytical ........be sure that there is no real impediment to selling i.e. a serious issue that keeps cropping up on buyer's surveys, a title irregularity or anything else that will genuinely cause real resistance to a sale going through cleanly.

Just for clarity, neither sales lost on my property, both at the start of the chain. 

Fretwired

JezWynd said:

Aren't bridging loans quite costly? What happens if your house fails to sell for 6 months, it's not unknown. I'd rather do it another way - sell your property and move into temp accomodation, you then become a cash buyer with all the advantages that brings.

Exactly ... and don't forget the hefty fees.

https://www.ukpropertyfinance.co.uk/bridging-loans/faq/

edbolivar

Without knowing more about you or your situation it is hard to comment on the bridging loan aspect.
However, I agree that the accepted wisdom is that they are often more expensive and you may have it for longer than you think, and so the ongoing servicing costs  needs to be comfortable.

I was in exactly this position 4.5 years ago, added to the mix was that the Mrs was 6 months pregnant and had mentally decorated the nursery of the new house and so I didn’t want to lose it. I had a buyer pull out and My agent did remarket mine for about 2 weeks after the event, but we got to the point where I felt I had to tell the couple I was buying off that I was no longer under offer.
They were very nice and gave me 2 more weeks to get under offer or they would go back on the market.
No joy after 2 weeks, so rather than bridging loans etc, I proposed the following to them.

I increased my offer by £5k (house was definitely worth it) but I had already offered asking price,  and went round with £2.5k in cash as a non refundable gift to them for waiting for us.

if I couldn’t complete they kept the cash, if I couldn’t sell, they kept the cash and we agreed a 6 month window.

So all in it cost me an extra £7.5k, to get a great house which was far less than the bridging costs and with only £2.5k being my max possible loss, in the event something went wrong.

ICBM

They're certainly expensive if it's going to be more than a short-term option - weeks, or possibly a couple of months - and if you can't sell the first house quickly you then have to decide how fast and far to drop the price to guarantee a sale and balance the two losses against each other.

But having done it twice I wouldn't hesitate to do it again - it actually made moving much less stressful knowing that we didn't have one "D-Day" on which everything had to be done at the same time. It even made the actual moving much easier and cheaper both times because since we owned both houses, I simply hired a Luton van for a week and did the job myself with a few borrowed friends.

I can't imagine putting myself in the sort of situation where if someone two or three links further down the chain backs out the whole thing falls apart, so it isn't even the fault of your buyer or seller and so you can't do anything about it and you have no choices other than to break the chain yourself, arrange an emergency bridging loan with no warning (if that's even possible) or make yourself homeless, with corresponding accommodation and storage costs, depending on which way round it is.

PVO_Dave

Thanks for all the input everyone, really hope it doesn't come to having to seriously consider going down this route. Great to have some opinions and first hand experience in the replies. I've asked my broker to get me some numbers so I can be sure either way, as it stands though, I think I'm too risk averse.

Waiting to hear how the viewings went on the two places that want to buy mine, if that's a no go, I'm going to have to tell the seller so I can get mine back on the market, I'll do what I can to secure more time, not averse to upping my offer if it keeps them sweet.

ICBM

PVO_Dave said:

Thanks for all the input everyone, really hope it doesn't come to having to seriously consider going down this route. Great to have some opinions and first hand experience in the replies. I've asked my broker to get me some numbers so I can be sure either way, as it stands though, I think I'm too risk averse.

I look at it the other way - I'm extremely risk-averse and that is why I've preferred to have bridging loans... what you're paying for is avoiding the risk that someone could cause a delay or break the chain through no fault of your own or even the parties you have direct dealings with. It sounds like you're already in this situation.

grungebob

buying houses and chains is an arse, surely there is a better way of doing this?

no idea about your circumstances of that of your sellers but in my recent purchase my buyers literally pulled out on the day my sellers where moving out! very stressful!  However since the house i was buying was double the price of mine they agreed to take mine in part exchange to keep everything on track, their idea too.  Once i calculated their expected investment return and all my associated costs we agreed prices and the deal was done.  They are currently making 10% per annum on my old house.

My Sellers had other properties  to use and seemed well off so you may not be able to do similar but worth a shot right? 

PVO_Dave

ICBM said:

PVO_Dave said:

Thanks for all the input everyone, really hope it doesn't come to having to seriously consider going down this route. Great to have some opinions and first hand experience in the replies. I've asked my broker to get me some numbers so I can be sure either way, as it stands though, I think I'm too risk averse.

I look at it the other way - I'm extremely risk-averse and that is why I've preferred to have bridging loans... what you're paying for is avoiding the risk that someone could cause a delay or break the chain through no fault of your own or even the parties you have direct dealings with. It sounds like you're already in this situation.

The bigger worry there for me though is around time to re-sell, we've sold it very quickly (both times!) but that's not a guarantee, the worry of two mortgages + £300+ interest for months I think is too much sadly.

Got until Monday before telling the seller now, 5 viewings lined up on the people that want to buy mine, one hopefully on mine from someone who's sold STC and ours is going to be re-marketed as of today, fingers crossed we get some movement one way or another before Monday!

As a side thought, with the new stamp duty rules, having two houses (even for a small time) is likely to result in a much higher amount of stamp duty?

Dominic

To re-acquaint this with a guitar forum...............CHAINS
Somebody wanting to buy a guitar from me can only do so when his Strat sells, he has a buyer for the Strat who can only complete the deal when his Analogman pedal sells..............
I might speak to my buyer and ask him to go and get a Guitar bridging loan !!!