Hi - a quick question about loans.

My aunt, who is a widow, is going to buy a house together with her son.
They will both be selling their own houses.
She owns her house, worth c.215K, without a mortgage.
His house is worth c.170K, but he's got a mortgage, and his equity is
worth c.90K.
He will be "porting" his mortgage to the new house.
The house they're buying is for 255K.

Her sale has just fallen through.
The owner of the house they're buying isn't willing to wait around for
them.
But they desperately want to avoid pulling out of their purchase.
So they need to take out a loan on her house in order to finance their
purchase.

The gap between the price of the new house and the price of her house
is 255-170 = c.85K.

A normal "bridging" loan doesn't seem like a solution, because they
have
little disposable income and wouldn't be able to meet interest
payments.

However, if they buy the new house and leave her house empty, surely
the fact that she would own a house outright, worth 215K, which would
probably sell quickly, would be sufficient security for a lender to
loan them at least the 85K they need?

They would like to pay off the interest at the same time as repaying
the loan.

Alternatively, they would want to borrow more than 85K (thereby making
it
something other than just a "bridging" loan), so as to be able to cover
the interest payments.

I strongly doubt her house would stick on the market for more than 2
months, and they could always drop the price.

I realise people can't give financial advice, but what are the relevant
buzzwords or ideas they should mention to their 'advisers'? (They plan
to shop around).

I kind of baulk when I see the word 'independent'. I saw it even at
Comet's retailers today - a sign saying "no commission, for expert
independent advice" - quite ridiculous! Maybe next it'll be in
shoeshops or restaurants?

I'm a bit worried that when they go to someone for advice, he'll say
"you won't get a loan product like that anywhere" if he can't broker
one himself, even if the adviser next door brokers exactly what they're
after, every day!

Anyway, I'd be grateful for any ideas.

Are there such animals as "pay-all-the-interest-at-the-end" bridging
loans? Or should they be thinking of a "secured loan"? Or what?

They come to me for advice but I know little about this area...

Cheers,

C

wrote:
Hi - a quick question about loans.

My aunt, who is a widow, is going to buy a house together with her son.
They will both be selling their own houses.
She owns her house, worth c.215K, without a mortgage.
His house is worth c.170K, but he's got a mortgage, and his equity is
worth c.90K.
He will be "porting" his mortgage to the new house.
The house they're buying is for 255K.

Her sale has just fallen through.
The owner of the house they're buying isn't willing to wait around for
them.
But they desperately want to avoid pulling out of their purchase.
So they need to take out a loan on her house in order to finance their
purchase.

The gap between the price of the new house and the price of her house
is 255-170 = c.85K.

A normal "bridging" loan doesn't seem like a solution, because they
have
little disposable income and wouldn't be able to meet interest
payments.

However, if they buy the new house and leave her house empty, surely
the fact that she would own a house outright, worth 215K, which would
probably sell quickly, would be sufficient security for a lender to
loan them at least the 85K they need?

They would like to pay off the interest at the same time as repaying
the loan.

Alternatively, they would want to borrow more than 85K (thereby making
it
something other than just a "bridging" loan), so as to be able to cover
the interest payments.

I strongly doubt her house would stick on the market for more than 2
months, and they could always drop the price.

I realise people can't give financial advice, but what are the relevant
buzzwords or ideas they should mention to their 'advisers'? (They plan
to shop around).

I kind of baulk when I see the word 'independent'. I saw it even at
Comet's retailers today - a sign saying "no commission, for expert
independent advice" - quite ridiculous! Maybe next it'll be in
shoeshops or restaurants?

I'm a bit worried that when they go to someone for advice, he'll say
"you won't get a loan product like that anywhere" if he can't broker
one himself, even if the adviser next door brokers exactly what they're
after, every day!

Anyway, I'd be grateful for any ideas.

Are there such animals as "pay-all-the-interest-at-the-end" bridging
loans? Or should they be thinking of a "secured loan"? Or what?

Because there is plenty of equity, you will find specialist banks who
will give you an ordinary mortgage on this. What you do is borrow £85k
"Interest Only", plus another £10k, and put the £10k away to meet the
24 repayments. In two years (or earlier) you pay off the mortgage, and
maybe face a redemption charge.

The fees tend to be horrendous, but you ought to be able to get the
equivalent of about 6.2%. Shop around at your local mortgage brokers.

On 11 Jun 2006 15:40:54 -0700, wrote:

Hi - a quick question about loans.

My aunt, who is a widow, is going to buy a house together with her son.
They will both be selling their own houses.
She owns her house, worth c.215K, without a mortgage.
His house is worth c.170K, but he's got a mortgage, and his equity is
worth c.90K.
He will be "porting" his mortgage to the new house.
The house they're buying is for 255K.

Her sale has just fallen through.
The owner of the house they're buying isn't willing to wait around for
them.
But they desperately want to avoid pulling out of their purchase.
So they need to take out a loan on her house in order to finance their
purchase.

The gap between the price of the new house and the price of her house
is 255-170 = c.85K.

A normal "bridging" loan doesn't seem like a solution, because they
have
little disposable income and wouldn't be able to meet interest
payments.


Ah so its a risky situation.

However, if they buy the new house and leave her house empty, surely
the fact that she would own a house outright, worth 215K, which would
probably sell quickly, would be sufficient security for a lender to


Probably. No guarantee. Sales fall through.

loan them at least the 85K they need?

They would like to pay off the interest at the same time as repaying
the loan.

Alternatively, they would want to borrow more than 85K (thereby making
it
something other than just a "bridging" loan), so as to be able to cover
the interest payments.

I strongly doubt her house would stick on the market for more than 2
months, and they could always drop the price.


The people waiting for her to buy their house will still have to find
another buyer. They could still be waiting when they have both sold
up.

I realise people can't give financial advice, but what are the relevant
buzzwords or ideas they should mention to their 'advisers'? (They plan
to shop around).


The full truth. Don't let them get caught up in getting a loan if they
can't afford interest payments from disposable income.

I kind of baulk when I see the word 'independent'. I saw it even at
Comet's retailers today - a sign saying "no commission, for expert
independent advice" - quite ridiculous! Maybe next it'll be in
shoeshops or restaurants?

I'm a bit worried that when they go to someone for advice, he'll say
"you won't get a loan product like that anywhere" if he can't broker
one himself, even if the adviser next door brokers exactly what they're
after, every day!

Anyway, I'd be grateful for any ideas.

Are there such animals as "pay-all-the-interest-at-the-end" bridging
loans? Or should they be thinking of a "secured loan"? Or what?

They come to me for advice but I know little about this area...


They need to exercise caution. House prices have gone up massively yet
there is no guarantee in GB's miracle economy that they won't slide.
Selling their houses should be the first thing to do.



Cheers,

C

wrote:
Hi - a quick question about loans.

Talk direct to a bank or building society.