How to get a bridging loan? What are the risks and precautions to take? Advice from Fanny Guinochet.
You may need to take out a bridge loan, you are between a new real estate purchase and the sale of your current property. It is a solution, but beware!
franceinfo: The bridging loan allows an owner to finance a new real estate purchase before having sold his current property?
Fanny Guinochet: Yes. For example, you find the property of your dreams, but there are months of work to do before you can live in it, and you need to stay in your apartment while the work is being done. So you cannot sell this apartment right away. But you need the money to buy your new property.
The bridge loan allows you to make this link, to manage the transition in a way. It is a deferred refund. The particularity of these bridging loans is that they are generally more expensive than a conventional mortgage. You have to add around 0.20 or 0.30% more, but above all there are often significant administrative costs.
Is a bridging loan necessarily limited in time? ?
Yes, one year, renewable once: which puts the pressure on, and that’s why you have to do your calculations well. Before you start, evaluate the price of your property for sale, without overestimating it, especially at the moment, because we are in a downward trend, even in Paris. And simulate the amount of your bridging loan, using online simulators, taking the time to go through the different scenarios with your bank.
In any case, before granting you a bridging loan, be prepared for the bank to scrutinize your income, even more than for a conventional loan, because there is this risk of selling or not selling your property. Especially now, when the real estate market is slowing down, banks are all the more watchful.
What to do when you can’t sell your old property?
This is unfortunately what many owners are going through at the moment, who have cold sweats. As the real estate market slows down, they find it much more difficult than expected to sell their property, and see the time of their loan run out.
So there are not 36 solutions. Often, you have to agree to lower the price of the property for sale, to better highlight it. To stay on time, negotiate with your bank, because if your property is not sold after 24 months, it will then convert your bridging loan into normal credit. And suddenly, the monthly payments become heavy to assume because they are combined with other credits.