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Bridge Mortgage: Change Your House Before Selling Yours

A bridge mortgage is a short-term loan used to bridge the gap between purchasing a new home and selling an existing one. It's sometimes referred to as a bridging loan or interim funding.

Being comfortable in a house does not mean that you have to settle for it. In fact, there are many who, on a whim or because circumstances force them, make the decision to change. 

The problem comes when, with the decision made (and the alternative already chosen), they realise that they still have to repay part of the mortgage that was requested to pay for the current property. If this is your case, this article interests you.

concentrated woman carrying stack of cardboard boxes for relocation | Bridge Mortgage: Change Your House Before Selling Yours
Bridge Mortgage: Change Your House Before Selling Yours | Photo by Andrea Piacquadio on Pexels.com

Traditionally, when you want to change your house, the usual thing is to first sell the current property where you live and, later, acquire the new property. But the new trends and the constant changes in the current market can lead the owner to develop the actions backwards; first by acquiring his new home, and later, by selling the older property. 

In this way, interesting alternatives such as the bridge mortgage are postulated as great options for selling real estate. We know the importance of buying and selling real estate, and, therefore, we encourage you to continue reading this article to find out all the details about it. 

What is the bridge mortgage? 

It is a specific model of mortgage loan that allows the interested party to buy a new home while continuing to pay the mortgage on the previous home. In this way, the very name of the mortgage 'bridge' allows us to get a very clear visual idea about its meaning, being the common link (the bridge) between the two houses. 

The bridging mortgage is a one-off service since once the old property is sold, the situation changes. This way, the interested party goes from having two homes to just one. 

Conditions for applying for a bridging mortgage

Having such different characteristics from the usual ones in the rest of the mortgages, make their conditions also far from the most common. For example:

  • With this type of mortgage for the change of house, you can access 100% of the value of the property that you wish to acquire, and its expenses, as long as the sum of the new mortgage loan and the amount still to be repaid of the one pending, does not exceed 80% of the appraised value of both houses.
  • The maximum term reaches 35-40 years.
  • When repaying the debt contracted with the mortgage for the change of house, thanks to the money from the sale of the old house, the bank normally does not charge any commission.

It must also be taken into account that, prior to granting the loan, the bank will carry out a solvency analysis of the petitioner, with the aim of knowing both his level of income and whether, based on this, he will be able to meet the monthly instalments. It will also check if you have any outstanding debt.

Advantages it offers 

As per SPV Mortgages,The bridging mortgage offers anyone interested in buying and selling real estate a series of advantages to take into account: 

  • It is a type of mortgage loan that provides more time to sell the old property. In this way, the person interested in selling their home is the main beneficiary, since it allows them to wait longer until they receive the offer they want. And also, the immediate sale of the property is not strictly necessary. Thanks to a bridging loan, you can buy another house without the need to get rid of the previous one. 
  • The bridge mortgage does not imply a high financial amount. This type of mortgage credit enjoys conditions similar to those offered by any traditional mortgage. 
  • It makes it easier to pay a lower fee upfront. For the most part, in the beginning, the banks demand a lower economic amount from anyone who is interested in contracting it. In this way, the client can go calmer and with fewer economic worries to face the process of selling the old property. 

Disadvantages that it presents 

Although the bridge mortgage can be, economically speaking, very interesting for certain people, it also presents a series of drawbacks to taking into account when contracting it: 

  • What happens if there are no purchase offers for the old property? In the event that this assumption comes true, it will be the person interested in the bridge mortgage who will have to take charge of the two properties, once the grace period has expired. 
  • It is possible to lower the house's value. Over time, homes suffer wear and tear that is directly reflected in their economic value. If the sale takes a long time to complete, it is very possible that the client will sell it for a lower price than planned. In addition, depending on the money that remains to be repaid from the bridge mortgage and the final sale price, there is a possibility that the client cannot, economically speaking, cover the entire outstanding capital of the mortgage. 

Although there are several alternatives that are offered for the sale of a property, it is advisable to take into account the benefits and costs, as well as the advantages and disadvantages offered by each type of mortgage.

And you, do you find the bridge mortgage interesting? 

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