As the title says, how can someone over come a bridging loan Fiasco? Let me explain from the pointy end of the sharp bladed finger knives of Freddie the Banker.
My other half decided in their poor judgement to obtain a bridging loan so that they could obtain another property to live in. Now this properties current value at present is worth approximately $340,000. It was bought for $285,000, now the first house that they own completely is worth approximately $410,000. I say approximately because they are the values given for the areas both properties reside in for the size of each property. Now you have that information here is the real problem.
The other half decided to bridge between the two in the hope that the first property would sell in one year. They are now at the one year mark. With the deadline looming, Freddie the Banker has said we may give extended time to allow for the sale of the property either 3 to 6 months and no more.
Now one final drama that effects this scenario is the issue of no job or lack thereof. My question is there a way to fix this loan structure to stop Freddie the Banker from foreclosure or repossession?
Here is some more added input, they have presently after a little luck scored a 12 hours a week work as a cleaner (determined by the employer as part time work, I’m still only thinking only casual work based on the hours) is this enough to refinance the second property that we currently live in?
The other half also explained that Freddie the Banker will only allow my half to rent out the first property if the salary level was $35,000 a year annual. Based on the hourly rate given by the employer my other half doesn’t reach that $35000 a year level. Currently the two sons are paying the bridging loan interest on the property one has full time work while the other has casual work neither son can afford to refinance the loan in there names or combined and because the loan is in the other halfs name and so are the properties they are at risk of losing everything!! How can they refinance to have a 30 year loan to stop Freddie the Banker from foreclosure or repossession??
The other halfs head is in the sand…. And is now staring down at the sharp pointy knives
Your help from a Nightmare on Banking Elm Street would be greatly appreciated,
Moggy
why hasn’t the house sold in 12 months? Has it even been listed? Were any offers made? Why the problem with the banker? Seems to me the problem is your half borrowed money without income and then has not done what the bank was told would happen, ie sell the first house. Talk about a sense of entitlement, the hide of the bank to assume borrowers will do what they say they will do.
There are a number of solutions:
1. drop the price until the house does sell
2. find more work. Going on what rate I pay cleaners at a further 22 or 24 hours would get her up to $35,000 pa. If she’s a really good cleaner then she should consider house cleaning. I pay $31 a hour to my house cleaner and $35-$40 is common
3. your half sells two-thirds or three- quarters of the first house to her sons. Are they living in it? They might be able to get a first home owner grant or at least reduction/exemption in stamp duty.If your half is stressed then maybe she needs to talk to lifeline or some other counselling organisation.
People are a fussy lot when it comes to purchasing property. Let’s just say the property is a ok nothing wrong with it. The house has been listed for sale by two different agents. Over that time period. Neither could get a buyer. Well except the first agent there was one offer but it was below the loan value of the second house. So that was pointless to accept but sure she could have accept that offer but still be in debt for the difference plus fees. Well the banker should never have offered the loan in the first place if they did it should have been an equity loan for a longer period rather than the 1 year bridging loan. You can’t be that foolish to suggest selling below the loan amount that’s just plain crazy if not stupid! Have you seen the real world lately ? Not that easy finding any type of work including cleaning! There is no such thing as job security anymore even good old former pm Abbott is testimony to that fact! Not all cleaning jobs pay those hourly rates. These days employers don’t want to pay Diddly squat …. The third solution might be possible but that depends on the sons willing to offer that kind of help?. No they all live in the second house while the first sits vacant with no tenant! Banker says you can’t put nobody there until the other half reaches the required work hours for that 35000 a year paycheck!!!! Now you see why I will never invest in property. No job no investing in shares or property and no such thing as job security. Everyone who has property especially is at risk of losing the lot like falling dominos losing your job or jobs spells disaster DEBT!!!!At least with shares you just lose money nothing else …
It’s OK to be fussy when someone is spending several hundred thousand dollars. Your other half bought a house to live in without the means to pay for it except by selling another property. That does not fit my definition of investing in property.
If you posted a link to the ad someone might have other suggestions.
Hi Moggy,
I found some of the story a bit difficult to conceptualise. In particular, this bit :-The other half decided to bridge between the two in the hope that the first property would sell in one year.
That “bridge between the two” comment means exactly what?
See, straight off from your words, I thought the other half had taken out a bridging loan (i.e. probably higher interest, and a personal loan rather than against a property, but usually only for short periods – weeks, not a year). That later comment of bridging between the two sounds more like cross-collateralisation – but that would make little sense if wanting to sell one….. ???
What IS really happening? Can you add more words around the actual structure?
It may be better to seek out a Broker or Financial Adviser who can go into it chapter and verse with you.
BennyMoggy is referring to a bridging loan, which some lenders offer customers so they can buy their next property whilst having the current on the market – the loan can capitalise during that period. It certainly does involve cross collateralisation.
Overall it’s unnecessary and a better result can be achieved through careful structuring.
Fundamentally though over 12 months on the market is TOO long – you can determine the sales price or time on the market, only reducing price will get this finalised.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
I don’t get the problem. You got a loan from the bank based on selling one property because you can’t meet the servicing requirements. You didn’t sell it because you’re not willing to meet the market – the buyers determine the price not the seller.
My options are
* Lower the price and take a small loan.
* Let it foreclose and risk losing everything.
* see if you can get on selling houses!It’s OK to be fussy when someone is spending several hundred thousand dollars. Your other half bought a house to live in without the means to pay for it except by selling another property. That does not fit my definition of investing in property.
If you posted a link to the ad someone might have other suggestions.The idea was not to invest period…..as for fussy most so called investors don’t care what they buy as long as they get what they want at what price and local. For them it’s like flipping burgers to make a so called profit! After all the name of so called world game is making money be it in shares or property or other means. I for one will not invest in property period!
Hi Moggy, I found some of the story a bit difficult to conceptualise. In particular, this bit :-
The other half decided to bridge between the two in the hope that the first property would sell in one year.
That “bridge between the two” comment means exactly what?
See, straight off from your words, I thought the other half had taken out a bridging loan (i.e. probably higher interest, and a personal loan rather than against a property, but usually only for short periods – weeks, not a year). That later comment of bridging between the two sounds more like cross-collateralisation – but that would make little sense if wanting to sell one….. ???
What IS really happening? Can you add more words around the actual structure?
It may be better to seek out a Broker or Financial Adviser who can go into it chapter and verse with you.BennyA bridging loan between the two houses. The bank secured one to lend for the other! Affectively allowing someone unemployed to purchase the second house but using the eldest son to pay the bridging loan interest repayments. It would make sense if you wish to sell to release the funds to pay for the second house. I did speak with a broker, the only way at this stage is for the two sons and the other half to combine their incomes what incomes they do have and still use the first house as security to create a new loan over say 30 years with a good interest rate. So they can eliminate the one year bridging loan.
Moggy is referring to a bridging loan, which some lenders offer customers so they can buy their next property whilst having the current on the market – the loan can capitalise during that period. It certainly does involve cross collateralisation.
Overall it’s unnecessary and a better result can be achieved through careful structuring.
Fundamentally though over 12 months on the market is TOO long – you can determine the sales price or time on the market, only reducing price will get this finalised.Would you care to share this so called structuring method? Or have I hit the nail on the head with the right structure I have mention earlier…. By all three of them combining their incomes to create the new 30 year loan using the first house as security therefore releasing the first home to rent out and allowing the second home to be mortgaged over a 30 year repayment plan. Your input would be greatly appreciated.
The price of the first house cannot be reduced any further it is already at bare bones now!
I don’t get the problem. You got a loan from the bank based on selling one property because you can’t meet the servicing requirements. You didn’t sell it because you’re not willing to meet the market – the buyers determine the price not the seller.
My options are
* Lower the price and take a small loan.* Let it foreclose and risk losing everything.* see if you can get on selling houses!Hahaha are you joking or what? Would you prefer they give it away for free? Buyers and sellers can choose their own price hahaha …. There are two houses not one !
Just remember holding on for a particular price has a cost too and at the moment as the price your half wants isn’t being offered it is unlikely the house is worth that much now.
Hi Moggy,
As Australia has many different markets, it may be worthwhile to add just WHERE these properties are. e.g. if they are in a mining town, I think we can all understand why the first property hasn’t sold for the price you want.Now, I don’t expect it IS in a mining town, but you see what I mean? The location and current property cycle of that location will have a lot to do with the price the house might fetch.
Benny
It’s not in a mining town that’s for sure….nor is the second house. Yes every state has its specific cycle it’s going through including each so called town…. But I certainly wouldn’t be giving the property away for free either! I remember I think about 5 to 10 years ago Tasmania was offering houses for a 1 dollar and I remember America had houses that fell backwards to zero. So if your wise I would be very weary investing in property “what goes up must also come down”! There was a guy once who worked in finance in America who walked away from all this property BS because he saw the truth ….now he lives in the wilderness only coming into town to the local library to check his email…basically turned his back on the world! I don’t blame him for I see the truth too! It’s there in black and white!
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