Buy before you sell, with a bridging loan

As a homeowner, are you looking for something bigger, or just a change of scene? Buying a new property usually requires selling your own. While waiting to receive the money from your real estate sale, it is a matter of taking out a bridging loan with your bank.

A "bridge" to your new acquisition

When investing in a new property, it is rare to raise all the money needed to pay cash. A bridging loan provides an alternative way to finance a home or apartment purchase before selling a previous property. Money advanced by the bank will be refunded immediately upon the transfer of the previously owned apartment or premise, without having to take out mortgage credit. 

In practice, a nested procedure

Each expert in real estate transactions at Engel & Völkers is very familiar with the mechanisms of bridging finance. For most people, when acquiring a new property more expensive than the previous one it is first necessary to pay off the loan on the purchase of your home. Your previous property only allows you to repay up to its actual selling value, which is often lower than the purchase price of your new acquisition: the difference in value remains your responsibility. A bridging loan covers an amount between € 12,500 and the maximum amount reported at the time of the transfer of the property. The bridging finance is added to your loan and so you have two payment terms with a slightly higher rate for each month of latency between your acquisition and your sale. The two mechanisms overlap or accumulate until you manage to sell your old home. 

Things you should know before taking out a bridging loan

Banks do not all offer the same deals. It is always good practice to analyse and compare the contracts yourself, even if you are asking for the opinion of your financial advisor Engel & Völkers. Even the underwriting conditions will differ depending on the financial institutions. Bridging finance is also limited in duration. It is essential that the total amount of the credit is repaid in full within two years ; failing this, two mortgages will foreclose. It is important to think carefully before embarking on such a payment solution: if the balance is affordable by virtue of the amount you think you will get from the sale, a bridging loan is not necessary.