Alternative to bridging loans?

M

markspur

Registered User
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4
Hello

We have a house worth around 160k. We are looking to buy one worth around 215k. We have a deposit of around 30k.

Thing is, our current house would not be ready to sell for a few months.

Would we have to wait until ours is ready to sell to buy the other house?

Ideally we'd borrow around 190k, buy the new place, sell ours in a few months and try to offset the borrowing from the sales proceeds?

Impossible?

Thanks in advance
 
Not impossible, but you don't have half enough info.

Is there a mortgage on current house? How much?
Are you both working? What's your combined income, number of dependent children, and what are your ages?
 
Sorry!
  • No current mortgage
  • Both working, combined incomes around 80k gross
  • No kids
  • 54 / 52
 
You'll need to pick up the phone and talk to a few banks, but that looks very achievable.

A problem will be you'll need an exemption to the 20% deposit. Banks won't like using that up in a case where the mortgage is going to be repaid relatively quickly - there's no profit for them in it.

Purely from a credit perspective there won't be an issue.
 
RedOnion said:
You'll need to pick up the phone and talk to a few banks, but that looks very achievable.

A problem will be you'll need an exemption to the 20% deposit. Banks won't like using that up in a case where the mortgage is going to be repaid relatively quickly - there's no profit for them in it.

Purely from a credit perspective there won't be an issue.
Click to expand...

Thanks very much RedOnion

Just so I understand, is the exemption to the 20% something that the banks will want or that will benefit us?
 
Sorry, the 20% deposit is a central bank rule, as your not 1st time buyers. Banks can only lend maximum of 80% of the house value.
You don't have 20%, so the bank will need to grant you an exemption, but the Central bank limits the number of exemptions they can grant.

I'm assuming here that at least one of you has previously had a mortgage? If not you only need 10%.
 
RedOnion said:
A problem will be you'll need an exemption to the 20% deposit. Banks won't like using that up in a case where the mortgage is going to be repaid relatively quickly - there's no profit for them in it.
Click to expand...

I wonder would they be more likely to consider it if they took a 3-5 year fixed rate mortgage?
So they wouldn't be paying off the lump sum immediately.
 
I would say that if you are keeping your current home, there is a good chance that Finance Ireland or ICS will give you the mortgage you require to buy your new home.

And after you buy your new home, then there is no penalty for changing your mind.

Of course, it would be much better if you could get a cash back mortgage from one of the main banks and then repay that and keep the cash back.

Brendan
 
Brendan Burgess said:
Is it not first time buyers i.e. people who had not previously owned a home?
Click to expand...
No, the definition is included in the enacting legislation, it's different to other definitions, for example in stamp duty legislation.

"first-time buyer” means, subject to paragraph (2), a borrower to whom no housing loan has ever before been advanced;"

"(2) Where the borrower under a housing loan is more than one person and a housing loan has previously been advanced to any one of those persons, none of those persons is a first-time buyer."
 
Thanks Red.

So someone who inherited a house is a First Time Buyer for mortgage purposes.

Although, it would probably not come up very often in practice as someone who owned a house should have a 20% deposit.

Mind you, if someone inherited a house and wanted to keep it as an investment, they would need only 10% to buy a home.

Brendan
 
@Brendan Burgess
Yes, inheritance would be where it comes up, but I'd imagine it's very rare.

As an example, the wording on the AIB application is:
"Have you ever borrowed money before that was secured on residential property
or land (where you had an intention to build a dwelling) in or outside the State?"
 
Would this apply to someone who married someone who had a property but never borrowed themselves for a mortgage loan?
 
kingvagabond said:
Would this apply to someone who married someone who had a property but never borrowed themselves for a mortgage loan?
Click to expand...
No, unless borrowing in sole name which banks very very rarely allow when married. In the case of joint borrower's, if either previously had a mortgage then they're not first time buyers.

"(2) Where the borrower under a housing loan is more than one person and a housing loan has previously been advanced to any one of those persons, none of those persons is a first-time buyer."
 
Thanks again RedOnion! Why is borrowing in sole name rarely allowed when married?
 
In simple terms, the other spouse would have stronger legal rights than the bank if you stopped repaying, but the bank couldn't make them repay the mortgage.
 
Most people would contact a bank for "Bridging" finance. Depending on the amount involved and your payment history the bank would be your first stop and perhaps you'll be OK.

I'll get slated for this, but here goes:- Some ordinary people farm out their savings as bridging loans. They charge what the banks charge. They are illegal money lenders. The agreement is usually a handshake or at best a piece of paper. I am no suggesting you go down this path, but if it is the only route for you, it might be worth exploring.
 
Leper said:
Some ordinary people farm out their savings as bridging loans. They charge what the banks charge.
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Hi Leper

I have never heard of this other than between family and friends. So if the OP's parents can give him "bridging" that is fair enough. There is nothing illegal in it. Maybe it's technically illegal for me to lend a friend €10,000 and charge them 2% interest, but no one would be interested in that.

It would be very foolish from anyone to lend a third party bridging at "what the banks charge.". The default rate would be huge.

I very much doubt that those who would be classified as "illegal money lenders" would lend these large amounts and would charge "what the banks charge".

They charge very high interest rates and if you get into difficulty repaying them, you will find that they are very nasty.

Brendan
 
Leper said:
Most people would contact a bank for "Bridging" finance.
Click to expand...
Hello 2008!!
Bridging finance for residential property unfortunately hasn't been available for the last 10 years. And the amount involved is too much for unsecured lending.
 
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