CENTURY 21 LAFAGE TRANSACTIONS TELLS YOU ALL ABOUT CREDIT-RELAIS, ITS ADVANTAGES AND LIMITS
Many buyers have to sell their property to finance their purchase.
In theory it is more practical to sell it before in order to have a significant contribution and not to have to contract a bridge loan. Nevertheless, in practice, it is often necessary to go through the credit-relay box during a transaction called «buy-sell».
What i a bridge loan?
This type of credit consists, for the bank, to lend a sum of money to the future buyer without waiting for the sale of his current home. Generally it lends 60 to 80% of the value of the property for sale. It is a short-term loan (usually less than 24 months).
It is often considered «expensive» because it has quite high rates and has a higher wear rate than the so-called conventional real estate rates.
What are the different types of bridge loans?
The «dry» bridge loan: The amount of the loan covers the amount of the new purchase. The value of the new property is therefore lower than that of the current property. The borrower only pays interest and/or insurance until the sale of the original property.
Back-to-back bridge loan: The value of the new property is higher than that of your current residence. The loan will therefore offer a combination of bridge and conventional loans. You will therefore pay the monthly instalments of your first mortgage loan and the interest on the new bridge loan.
The bridge loan buyback: This credit consists in having your bridge loan redeemed by a bank to smooth all the monthly payments. A single long-term loan that will include the bridge loan.
NB: Banks can make their own estimate of your property, so it is not recommended to inflate the price of your property in order to get a more attractive sum.
Be aware that if you already have a signed sales agreement for your current apartment, the risks of not making the sale are then quite low and the bank will be more able to increase the amount lent. Conversely, if your apartment does not sell and there is no visit on it, the bank will be suspicious. Banks offer only 60 to 80% of the value of the property, especially because of the risk of not selling the property at the discounted price and must lower the price.
Regardless of the type of loan chosen, it is better to prepare your bridge credit application file well and to favor the call to a broker which will allow you to obtain the best guarantees.
Bridge financing has advantages and disadvantages. If you want more advice do not hesitate to contact us, we will refer you to our partner broker with pleasure.
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