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Bridging Loan

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  • 08-12-2015 3:54pm
    #1
    Fol20
    Registered Users Posts: 3,624 ✭✭✭


    Hi guys,

    i was just wondering if bridging loans are still available today. For example i own a house, is it possible to get a loan to purchase another house with the intention of selling the old house once the new one is purchased. In the interim, i would pay interest fees etc.


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    #2
    byronbay2
    Registered Users Posts: 1,772 ✭✭✭byronbay2


    Dangerous game OP - not one that I would recommend at all. Bridging loans can be got alright (if your credit is good enough) but the interest rate will be high (10% or so) and if your own house takes a long time to sell, it can get VERY expensive. Assuming that you're upgrading and the new house costs €350K, you are looking at €35K in interest for a bridging loan that lasts a year. It could easily take a year (or more!) between when you have to pay for the new house and when you get payment for your own.


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    #3
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    in my situation it could potentially be a downgrade and have cash left over. How do people usually get a different house then if their money is tied up in a previous house?


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    #4
    Frynge
    Registered Users Posts: 1,667 ✭✭✭Frynge


    There is a company in dublin that offers this but the charges are astronomical. 5k charge for arrangment plus 24% interest. They wil only give 60% of the value of the house and take a charge on it.

    As an example if you used this to release 200k equity for 3 months it would cost you 17k.


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    #5
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    Fol20 wrote: »
    in my situation it could potentially be a downgrade and have cash left over. How do people usually get a different house then if their money is tied up in a previous house?

    It's called a chain. This is the second time this week I've drawn attention to these. I only make that comment as I realise the Irish way is to buy and stay in the long term, I didn't realise quite how much that was ingrained though. No criticism intended just a musing.

    Basically you go sale agreed on the new place with the condition of buying when your place sells. Alternatively you sell your place then go sale agreed on a new place, usually it's falls between the two somehow, e.g. you go sale agreed after X then hope your place goes sale agreed etc.

    It's very common and an EA and solicitor will guide you. I remember hearing the stories from the parents and in-laws in the UK on how you'd be in an EA with a queue of people come closing day all involved in the one transaction.

    Alternatively, you sell then rent, this will make you more attractive to sellers and purchasers. Both options are cheaper than a bridging loan which I thought had gone the way of the Ark.


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    #6
    Uno my Uno.
    Registered Users Posts: 905 ✭✭✭Uno my Uno.


    Bridging loans are essentially a thing of the past now as none of the banks will provide them in the usual course of things. The result is the existence of chains of sales which can be difficult but are manageable.


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    #7
    CreepingDeath
    Closed Accounts Posts: 8,015 ✭✭✭CreepingDeath


    Fol20 wrote: »
    i own a house, is it possible to get a loan to purchase another house with the intention of selling the old house once the new one is purchased.

    I'm with the EBS and just sold my house for a similar priced one in a different area. As part of their tracker retention mortgage conditions, I had to sell my house first, before purchasing the other.
    Absolutely no bridging allowed at all.

    But as mentioned, it's a messy process being in a chain if you don't want to rent in between.
    I went sale agreed with my buyer and found a house we liked and went sale agreed with them, with the understanding that it required the proceeds of my house.

    So you typically need a minimum €4-€6k or so as an estate agent deposit.
    Then the booking deposit is 10% of the value of the house you are buying minus your initial deposit €4-€6k deposit.
    We were lucky that my wife took voluntary redundancy and we had that 10% deposit.

    But if not, your soliticor would do their best to line up purchase of the new house as close to the sale of your old house.
    Our solicitor managed to complete the sale and purchase on the same day.
    Can recommend him (Lucan based) if anyone wants.

    But if we didn't have the 10% deposit, then there could've been a gap of probably at least 5 days minimum I'd say to fully complete the sale and then for the solicitor to draw down the loan and whatever positive equity you had from the sale to buy the other house.

    I'm guessing a minimum of 5 days, just from the delay in wiring money between parties etc, but it could be significantly longer if contracts are only exchanged between yourself and the new house seller after your sale went through. Then there's plenty of horrific bureaucracy on 3 sides to delay the process at every step ( your buyer, you and the new house seller )

    It's painful and will never met your original completion date...

    good luck !


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    #8
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    MarkAnthony wrote: »
    It's called a chain. This is the second time this week I've drawn attention to these. I only make that comment as I realise the Irish way is to buy and stay in the long term, I didn't realise quite how much that was ingrained though. No criticism intended just a musing.

    Basically you go sale agreed on the new place with the condition of buying when your place sells. Alternatively you sell your place then go sale agreed on a new place, usually it's falls between the two somehow, e.g. you go sale agreed after X then hope your place goes sale agreed etc.

    It's very common and an EA and solicitor will guide you. I remember hearing the stories from the parents and in-laws in the UK on how you'd be in an EA with a queue of people come closing day all involved in the one transaction.

    Alternatively, you sell then rent, this will make you more attractive to sellers and purchasers. Both options are cheaper than a bridging loan which I thought had gone the way of the Ark.

    Chains are a pain in the arse in any country and are to be avoided at all costs. Best to sell and then try to purchase with temporary accommodation in the middle. While it might sound expensive, in many parts of the country your purchasing position will be stronger and the rent will not be "dead money".


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    #9
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    Marcusm wrote: »
    Chains are a pain in the arse in any country and are to be avoided at all costs. Best to sell and then try to purchase with temporary accommodation in the middle. While it might sound expensive, in many parts of the country your purchasing position will be stronger and the rent will not be "dead money".

    I don't disagree and to make it very clear for the OP you need to weigh up the pros and cons of three scenarios:

    -Bridging loan
    -Chain
    -Renting in the middle

    Even renting for an entire 12 month fixed term lease I suspect would be the least expensive option when you consider the charges for a bridging loan or the reduction in bargaining power in a chain but then there are other factors and I'm no expert.


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    #10
    phil1nj
    Registered Users Posts: 716 ✭✭✭phil1nj


    CreepingDeath wrote: »
    I went sale agreed with my buyer and found a house we liked and went sale agreed with them, with the understanding that it required the proceeds of my house.

    So you typically need a minimum €4-€6k or so as an estate agent deposit.
    Then the booking deposit is 10% of the value of the house you are buying minus your initial deposit €4-€6k deposit.

    With regard to this point, I am currently in this position too. We have made an offer on a house which has been accepted with the understanding that the purchase will be completed using the proceeds from the sale or another property.

    We have paid the paid the estate agents fee of €5K, we have the balance for the deposit. My concern is how long the seller of the other house will wait for the sale to close. Is the EA the best person to ask about this? We are starting to worry that with each passing week the house is on the market, the seller may be inclined to cancel the sale. Any suggestions?? Thanks,


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    #11
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    byronbay2 wrote: »
    Dangerous game OP - not one that I would recommend at all. Bridging loans can be got alright (if your credit is good enough) but the interest rate will be high (10% or so) and if your own house takes a long time to sell, it can get VERY expensive. Assuming that you're upgrading and the new house costs €350K, you are looking at €35K in interest for a bridging loan that lasts a year. It could easily take a year (or more!) between when you have to pay for the new house and when you get payment for your own.

    Its more 14-15% than 10%- it can be gotten, but banks charge a ridiculously high interest rate on it, to try to discourage customers from seeking it. AIB and BOI will both provide bridging finance- on very onerous terms- if pushed sufficiently.


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