Anyone who has ever bought a house will know all of the difficulties you have to overcome before you can even think about packing your house up and calling the removal men.
One of the biggest difficulties you’ll face is finding that you can’t sell your old home quickly enough and that you’re risking the deal falling through if you don’t come up with the cash.
So, what are your options? Well one way to secure your new home is to consider a bridging loan. This kind of loan is intended to provide the borrower with a cash ‘bridge’ until another form of finance becomes available and they can pay back the loan.
However, these loans can be expensive and you should only consider them if you are sure you can pay them back and you have no other finance options. Here are some facts about bridging loans to make sure you don’t get caught out and end up with a loan you can’t afford.
Think before you sign
Taking out a bridging loan will mean that you’ll find yourself paying back your loan and your mortgage at the same time, so it isn’t just a way of getting ahead of property chain issues.
Unless you know exactly when your house will be sold think long and hard before taking out the equivalent of another mortgage sized debt. A bridging loan isn’t the answer if you are simply struggling to sell your old house and you’ve found another house you’d rather live in.
You should also give up the idea of this type of loan if you want the money because you’re finding it hard to get a mortgage. You may also find that the lender will take both of your properties if you miss payments, so you could find yourself without a roof over your head.
When can I use a bridging loan?
The bottom line when it comes to deciding whether a bridging loan is the right option for you is whether you know exactly when you’re going to sell your house. If you do then go for the loan, if you don’t then approach with caution.
What are the alternatives?
If you don’t think a bridging loan is right for you then there are other options available. Renting out your old home is a good way of releasing cash and maybe having a little bit of cash coming in in the future.
Here’s how it works:
Re-mortgage your existing property to release enough cash to put down a deposit on the mortgage on your new home. You then convert the mortgage on your old home into a buy to let deal and use the rental income to meet the mortgage repayments.
The mortgage on your new home is then operated as normal and if you decide you don’t like being a landlord after all you can sell the property at the end of the tenancy agreement.
Wendy Linn writes extensively on modern live and the trials of moving house after recently moving from California and her experiences with Realtors.