Can I take out a mortgage to repay a bridging loan?
Posted on 18 June 2016
"I brought a new home before the sale of my old house with the help of a bridging loan of £256,000 from my family. Now, seven months later, I want to take out a mortgage for this amount and repay the bridging loan. Having approached HSBC, they say they don't have a classification of mortgage that fits these circumstances other than 'debt consolidation' (i.e. paying off unsecured borrowings) which is capped at £30,000. Is this approach the norm for the big high street lenders?"
Thank you for your query submitted on our website.
As you have owned your new home for more than 6 months, there is a possibility that we can arrange a remortgage of your existing property to raise the finance to repay the bridging loan. The choice of lender may be restricted as the bridging loan is not provided by a lender and originates from your family, but I am hopeful this can be overcome as you have a good salary of £70,000 and looking to borrow less than 4x your income, which makes this transaction feasible. I would also need to know if you have sold your old house. If not when is the potential sale of this property likely to go through as this may have an impact on lender choice and possible affordability issues.
Most high street lenders such as HSBC will class this transaction as debt consolidation and limit the borrowing limit to £30,000. I recommend that you speak to an independent mortgage adviser now about your situation. They will be able to assess your current situation in detail and let you know what lenders and products are available to you. In addition, there are lenders on the market who still underwrite manually and may be willing to take a view on this type of remortgage based on your individual circumstances and requirements.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.
John Charcol is a trading name of John Charcol Limited and its Appointed Representatives. John Charcol Limited is authorised and regulated by the Financial Conduct Authority. The Financial Services Register number is 665649. Registered in England No. 9157892. Registered office address for John Charcol Limited is 5th Floor, Cutlers Exchange, 123 Houndsditch, London, EC3A 7BU. The FCA does not regulate some investment mortgage contracts. Calls may be recorded for training and monitoring.