Tea and Mortgage Podcast #27: Bridging Loans in Ireland

0:00 – 0:13 Norm Schriever
All right, everyone, how are you? Today on the Tea and Mortgage Podcast, episode number 27, with John Coleman, we’re going to talk all about bridging loans.

0:14 – 0:31 John Coleman

Hey, Norm, how are you keeping 27, eh? I keep… Well, I’m telling you…

I’m telling you… I have to pinch myself at the day you persuaded me to do this, so it’s crazy to think we’re on to number 27 now. But hopefully we have an interesting show today lined up.

0:32 – 0:58 Norm Schriever 

Yeah, absolutely. Number 27, we’re getting up there, and it’s great that we’re diving deep today into some of the lesser-known topics about mortgage. It’s not just the usual first-time homebuyers, or buying a house, or interest rates, but a tool, I would call it a tool, a finance tool, because if you need this, you really need it, and there’s not a lot of great knowledge about it.

So today, we’re going to talk all about bridging loans.

0:59 – 1:35 John Coleman 

Yes, absolutely. If anyone that’s claiming they’re an expert in this, they’d be slightly misleading, given that it literally was taken off the market when the crash happened back in 2008, 2009, and hasn’t been seen since. So it was reintroduced into the market, Norm, at the back end of last year, in October between ICS mortgages, and we brought this back to the market, and I can see it having great use for a small segment of people, but that’s what we’re here to discuss today.

1:36 – 2:09 Norm Schriever 

Yeah, absolutely. And like you said, it’s something a lot of loans went away, and a lot of programs went away around 2008 in Ireland and the US. They were just too risky or too exotic, they call them sometimes, exotic mortgages.

But this is something that’s starting to come back in the market, like you mentioned, and it does serve a very specific purpose. If you need it, you really need it. And so we’re going to talk a little bit about the nuts and bolts of bridging loans today.

Why don’t you start with just telling us in general, what is a bridging loan?

2:10 – 4:58 John Coleman 

Well, a bridging loan, rather than give a definitive definition, I might give an example of a situation, which I think helps people understand it in kind of real terms, or what actually happens. So hypothetically, you own a home, you own it outright, okay, and you’re buying a new home that either needs work to be done to it, and typically might need work to be done to it, so you actually can’t move in, okay? But what you don’t want to do is move out of your home in the interim period while work is being done.

And that’s the sort of, there’s your problem, okay? That’s the sort of area that this bridging plan has to solve. So in effect, what you would be doing, so again, I’m going to make figures up here for a second, the home that you own currently is worth 500,000, the home that you’re buying needs basically, hypothetically, 250,000 to get it livable in, basically, okay?

So what you don’t want to do is basically sell your existing property right now, have to find somewhere to rent in Dublin, which is, or in Ireland, which is really, really difficult, and also really, really expensive, and then you’re waiting for that, and then you’re working on basically building it out to your satisfaction when you’re ready to move in. This loan, in effect, will be money raised on your existing property with the purpose to fund the cost of building, but you stay in your own while the work is being done, okay? So you never have to leave.

So what happens then is, and this is the reality of the situation, you get the money, you get it relatively quickly, you do the work, and then basically when the work is done and you move into your home, you then basically put your existing property up for sale. When that sells, then the bridging loan that you’ve got from the bank is cleared. So it’s a very, very short-term plot, but it basically solves that problem in a very easy way because not everyone has access to extra money to do the work while, and they’re relying on the equity they have in their own home, but they don’t want to have to move out of it while the work has been done.

4:59 – 5:20 Norm Schriever 

Yeah, that’s a great case study or example of why exactly that kind of short-term financing solution, really, right? It’s a solution to a particular problem works. And so let me ask you this.

How does a bridging loan differ fundamentally from a typical mortgage that someone uses to buy a house?

5:21 – 6:16 John Coleman  – 

Yeah, great question. The concept is the same. It’s basically, it’s money related to a property, okay, but it’s not, it’s a short-term, a mortgage normally in theory is somewhere between 20 to 30 years and you’re paying it over a much longer period of time.

This is, as the title really suggests, bridging loan. It’s a kind of a bridge, it’s a short-term, a stopgap between A and B. So the bridging loan is only a short-term, only a short-term finance solution.

It’s not a mortgage house discountation of basically being, you’re buying it, it’s your home and you’re buying it over a longer period of time. A bridging loan literally is just a, it’s a stopgap to solve a gap, basically or a need for finance in a very short period of time.

6:17 – 6:45 Norm Schriever

Yep. Yep. Perfect.

Perfect. And people need to understand that because one of the key elements, of course, it makes perfect logical sense, but a bridging loan is priced differently and cost differently and the interest rates work differently and it is a little more expensive, but the point is it’s solving a big problem for you and giving you access to funds when otherwise they wouldn’t be available. And like you said, you’re not paying it off over 20, 30 years like a typical mortgage, but in the short term.

6:47 – 8:35 John Coleman
And so, um, good point on experiments, right. You know, I’m sorry to cut across to you there, basically where you’re, what, the way I would explain this to people on, on the cost, and it’s very important that everyone understands it on sort of upfront, they do charge you sort of a, um, a fee for arranging it. Then they charge a fee for when you’re closing it out and then there would be a monthly interest rate currently at about 1% per month.

Okay. You need to do those costs in terms of, um, the overall situation. Okay.

So if you couldn’t buy the house that you’re looking for, okay, because you don’t have the access to the funds currently, we’re obviously in a rising price market. So the cost will actually be probably incorporated into the increase, the value of the profit that you would end up with on the back of it. Okay.

Our view, the cost in terms of, well, if we have to rent for a period of time, how much would we be paying on rent for that? So it’s, that’s how I would explain to people how to view it and then to see, does it make sense on that basis rather than just looking at the cost in isolation? Okay.

Because if you compared it to your traditional mortgage, yes, it’s going to be more expensive, but if you’re looking at it in terms of, well, am I paying, what would I be paying in rent and what will be, how much would the property now cost me in 12 months time if I have to sell and wait? And if you view it in those terms, well, you may end up with a different answer to that question.

8:36 – 8:56 Norm Schriever 

Oh, of course. Yeah. And, you know, I like to look at it, not like, okay, compared to a mortgage and interest rates and fees and all that stuff, because of course it’s apples and oranges, but what is your, in that situation, what’s your other alternative?

And there’s not a lot of good inexpensive alternatives where the money is available to you when you need it. And so that’s why this is perfect.

8:57 – 9:21 John Coleman
There’s no other alternatives that I’m aware of unless people have access to, well, I suppose family money might be, is the only other solution I can immediately think of, you know, and if there’s family money available, well, this isn’t the right solution, but in the main, anyone that’s looking at this is looking at it because they have that immediate need, you know?

9:22 – 9:51 Norm Schriever 

Yeah. And that’s why it’s such a big deal that this came back on the market. Like you said, John, it wasn’t available after 2008, but just in October 2024, I believe it was, ICS mortgages, yeah, ICS mortgages there in Ireland, reintroduced their bridging loans.

I guess it’s a housing bridge loan product. And so they wanted to do that to ease some of the bottlenecks in the secondhand housing market and just for smoother transitions for those looking to change homes.

9:52 – 10:35 John Coleman

So it’s definitely a good tool. They definitely saw a niche, to use an American term, they definitely saw a niche there based on, like it is back in the UK for some while and the market there is pretty, it is a very substantial market there in the UK for this now. So they felt based on the research they’ve done that there was also a missing need here in Ireland.

And I could personally back that up on the number of people that would have asked me in the last number of years, oh, is there access to bridging buyouts? And I just have to, I was briefly having to say, I’m actually sorry, there’s not currently. And in that situation, there really wasn’t a solution for people.

10:36 Norm Schriever 

Yeah.

10:37 – 11:32 John Coleman

It made things certainly more difficult. I mean, it stopped, like you talked in terms of sort of a grand looking scheme, but it stopped people from the natural generation moving from one house to another and increasing the stockpile of houses for others. So it has created a bottleneck in the supply of property to, on the back of people not being able to, not having access to this.

So there is on a sort of account, the bank is obviously doing this for their own commercial reasons, but the side product of it would be that it should help. And now it’s too early to actually say this with absolute certainty, but it should help free up or bring more stock to the market, because anyone that couldn’t have availed of this wouldn’t, would have just stayed where they were and their current property wouldn’t be going on to the market, you know.

11:33 – 11:47 Norm Schriever 

Yeah, that’s that’s fantastic. So also, how would someone, people probably have the question now listening to this, they’re probably like, hmm, this this can work for me. Where would they actually go or how do they get a bridging loan there in Ireland?

11:48 – 14:38 John Coleman 

Well, they talk to me to start with, because ultimately, and I think as I said, anyone who’s claiming to be an expert in this is going to be, so it’s a slightly misleading. I’ve been in this mortgage business for a long period of time, but even I am still learning as I’ve been going along, I would have a very good relationship with my contacts in ICS. Since this project launched, I’ve been continually bringing scenarios to them to say, is this a runner or is that not a runner?
So in effect, just to kind of add a little bit more to the understanding, right, the bank do protect themselves, right? They take a charge on the property you’re going to sell and they take a charge on the property that you’re kind of buying in effect or using to build. So they are protecting themselves on that.

There is collateral. Yeah, yeah. So that’s where the similarities to the mortgage really is.

It’s the collateral is the property, OK, where everything else is slightly different than the term. But that’s where it comes from. Obviously, the banks have their own set of criteria.

They have obviously properties that they’re happy to take bridging loans on. So that’s based on location, typically the main cities and any kind of rural areas with kind of population of about five, five thousand. That would be their kind of their starting point.

They are still bound by, as things stand, the central bank rules on mortgages, which is slightly out of line, in my opinion, but it is what it is. Their conversations are being had, but in real terms, there needs to be a minimum salary there. But there are other ways around it.

It doesn’t need to be just two people on it. There can be more than two people on the finance. So there’s ways of making it happen.

What I would always say to people in the first instance, break down the reason that you’re doing a breakdown, the summary of the properties involved, and let me know. And I would have a conversation. So the starting point is to understand the cost.

The next starting point is to understand in a very quick, is this something that will work for the individual, you know, and bring it to someone like myself, we’ll get that information to them in a quick time frame so that it can, like even with your traditional mortgage, and you know, it’s all about having your road map, Norman, it’s all about knowing where you stand at any point. So the quicker you arm yourself with good information, the better. Well, that’s great.

14:38 – 14:49 Norm Schriever 

Yeah. And so for anyone listening, if they have questions about, you know, what is a bridging loan, how to get a bridging loan in Ireland, best place to find a bridging loan.

14:50 – 15:31 John Coleman 

ICS are the only show in town on this, you know. Yeah, yeah. I like their innovative thinking, and they have literally identified this area that is not available, or hasn’t been available, and they have basically gone, right, well, we can, this is an area that we can basically help people, and there is a need for it.

So from what I’ve seen in the short period of time, there certainly is an interest in it for sure, because it’s advised sort of put it out there that I’m looking at this, but I’m getting a couple of inquiries every single week on the back of it.

15:32 – 15:46 Norm Schriever 

Wonderful. Well, there it is, folks, that bridging loans there in Ireland. If you have any questions, of course, you know where to find us and feel free to contact John and he’ll walk you through everything and give you your best options and help you get it.

Thank you for that, John.

15:47 – 16:13 John Coleman

No problem, Norman, it was always a pleasure. It’s something that I, well, this is all about education. This is the show that we do, Norman, so as I said, this particular product probably won’t be of use to our wider audience, but there will definitely be a certain cohort that will be listening to this and going, oh my God, this could be the solution for what we’re looking for.

16:14 – 16:27 Norm Schriever 

All right, John, and we’d be remiss if we didn’t mention that today when we’re recording this is actually Sunday, March 16th in the evening and tomorrow, of course, is St. Patrick’s Day. So happy early St. Patrick’s Day to you.

16:28 – 16:50 John Coleman

Thanks, my friend. Yes, I will give you, I will tease you a little bit. I was out last night and in the middle of everyone singing in general bar, you know, and my God, it was the Americans of Concord have come over.

They’re taking over and hoping for St. Paddy’s Day. So hopefully by the time everyone has probably listened to this, they will have come and gone. I hope everyone had a great day.

16:51 – 17:04 Norm Schriever 

Yeah, hopefully the Americans won’t ruin your St. Patrick’s Day, definitely. I know it’s a huge holiday in the U.S. for mostly just an excuse to get out and have a pint and have a little bit of fun and wear green. So it could be worse.

17:05 – 17:10 John Coleman 

Yeah, absolutely. I know everyone seems to be in high spirits, shall we say.

17:11 – 17:20 Norm Schriever

Wonderful, wonderful. Well, thank you, everyone, for listening to TM Mortgage Podcast number 27. Some great information about bridging loans and with your host, John Coleman.

17:21 – 17:25 John Coleman

Brilliant. Yeah, thanks for listening and answering any questions. Just drop me a line and we’ll take it from there.