Between the growing family, the professional transfers or the house of your dreams that you don’t want to pass up, wanting to buy a new property when you haven’t sold the old one is a delicate, but common situation.
If, like many French households, you do not have sufficient funds to finance the payment of your new acquisition, there is the bridge loan. A transition loan that allows you to buy your new home while waiting to receive the money from your future sale.
How is it calculated?
With no minimum duration but limited to two years, this partial advance is calculated according to the price you will get when you return your old accommodation.
Generally, its amount represents between 50 and 70% of the value of the property. The value in question is estimated by a notary or a real estate expert. This estimate must appear in due form in a sales mandate to be presented to your bank before any signature.
Dry or backed?
Your banking establishment can offer you two types of bridging loans: with total franchise or dry. The bridging loan with total deductible, or “back-to-back” loan, is associated with a long-term “classic” mortgage. It can extend up to twelve months and its advantage is that it makes it possible not to pay the interest monthly, and therefore to reduce the monthly payments between the resale and the purchase of your property.
It is only from the moment you made the sale of your old home that you will repay the borrowed capital, as well as the interest. In the event that the amount of the resale is greater than that of your credit, you have this amount to make an early repayment on your conventional credit. Good to know: for this financial arrangement, only one guarantee is necessary.
The “dry” bridge loan is the second version offered by banks. Unlike the “back-to-back” loan, it does not go along with conventional credit. This solution, which can be considered as an “advance”, starts from the premise that the resale of your old property will allow you to be a beneficiary, and therefore have a large amount of money.
Thus, you will only reimburse small monthly payments while waiting to settle the capital once the sale is completed. But beware: these monthly payments correspond to interest which is often at a rate much higher than the rate charged for a bridging loan with total deductible.
And you, what do you think of this type of “transition” loan? Have you used it? Would you be willing to recommend it to a friend?