Those struggling to sell their home may find the new range of one-year mortgage deals a helpful way to fund their plans.
A number of building societies are offering one year deals, allowing those who have already found a new property to move, before selling their existing one.
In the past, the only finance option available would have been a bridging loan – but these deals are usually very expensive. According to mortgage broker Enness Private Clients, a borrower taking a £500,000 loan on one of the new one-year mortgage deals would save around £18,000 in comparison with a typical bridging loan.
Market Harborough Building Society offers a one year deal at 5.49% – almost half the bridging loan rates which start at around 0.75% a month or 9% a year. There is an arrangement fee of 2% (min. £6,000) – slightly higher than a typical 1% bridging loan arrangement fee – but no early repayment charges. Borrowers can take up to £1.5 million, with a minimum loan of £200,000.
Harpenden also offers a range of short term deals – funding £687,500 for one Enness client at 6.19% with a 2% arrangement fee. The client had their £1.2 million home on the market but when the sale fell through, this threatened completion within a tight deadline on their chosen new build property. The one year deal ensured that the slowdown in the housing market did not affect their plans.
Short term mortgages are great news for those stuck in a chain where their existing home hasn’t sold as expected. They can also work well for small business owners needing to release money for their business quickly. Property investors are one of the product’s key demographic.
For those who need a smaller level of finance, a personal loan could be an alternative solution. While most lenders cap personal loans at £30,000, some lenders are offering generous sums – First Direct, for example, will advance up to £50,000 at 6.7%. The interest rate is nearly double its 3.4% rate for loans of less than £30,000 and if someone borrowed over the maximum seven year term, they would expect to pay back £62,449 at £743.45 a month. Sainsbury’s Bank also offers personal loans up to £40,000 (6.7% representative APR – Nectar cardholders only, 2-3 years or 6.8% representative APR) and Tesco Bank offers loans up to £35,000 (6.7% representative APR – Clubcard cardholders only, 1-7 years or 6.9% rep APR 1-7 years).