Is it possible to transform a bridging loan into a classic loan?
The bridging loan is part of the big family of the mortgage loan. Unlike traditional mortgage, this is a short term loan. It is granted to the debtor to finance the purchase of real estate, pending the sale of another. This is a transitional solution. The duration of a bridging loan cannot exceed two years.
In principle, the bridging loan always accompanies a classic mortgage loan. More often than not, the new property to be acquired is of a much higher value than the one the owner is trying to sell. But in which cases would it be possible to transform a bridging loan into a classic loan?
The debtor can ask to transform his bridging loan into a mortgage loan if he cannot sell the property when due. But in this case, its debt ratio must allow it. The institution will again calculate the debtor's repayment possibility. If the debt ratio of the latter leaves no chance for a classic mortgage, a real estate foreclosure will be carried out on the property object of the purchase or that awaiting sale.
- Understand how a bridging loan works
- The conditions for obtaining a bridging loan
- Mortgage loan: the advantages and pitfalls of bridging loans
- Who can benefit from a bridging loan ??
Understand how a bridging loan works
The bridging loan is a short-term mortgage, granted to finance the purchase of a property while waiting for another to be sold. It is a real estate purchase and resale system. The debtor already wants to acquire the new asset, even if he has not yet succeeded in reselling the old one.
In principle, the amount of the loan corresponds to the value of the property for sale. But the terms of repayment are determined according to the debt capacity of the subscriber. The bridging loan cannot exceed two years. If at the end of the contract the debtor is still not able to repay, if his debt capacity allows it, he can request a transfer to a traditional mortgage.
The conditions for obtaining a bridging loan
The granting or not of a bridging loan will depend on the financial profile of the borrower. We analyze the same characteristics as in the context of traditional mortgage: the sources of income and the main charges. The goal is to determine the debt capacity: the debt ratio and the remainder to be lived. In principle, the amount granted corresponds to the value of the current home for sale.
It should be noted that in a bridging loan, at the time of repayment, the borrower will pay the interest and the insurance. The repayment will take place after the sale of the current property.
Mortgage loan: the advantages and pitfalls of bridging loans
The bridging loan is the solution adopted when you do not yet have the means to finance the simultaneous possession of two properties. In principle, you sell the first good first before you can buy the new one later. The bridging loan allows direct access to the purchase without necessarily having to wait for the conclusion of the sale. The sale price will correspond to the bridging loan amount.
But we must be careful, of course, the alternative is most interesting. But being a short term loan, the loan term is very limited and the time can pass quickly. It is a risk to bet on the sale of the first good.
Who can benefit from a bridging loan ??
The eligibility for a bridging loan will depend on the financial profile of the borrower. But we must not forget that it is above all a short-term mortgage. It is therefore primarily intended for any owner of a property, but who wishes to acquire another ?? In some cases, it may be an SCI. In all cases, you need at least a first clean good.
Then, the accessible bridging loan will depend on the value of the first home and the borrower's debt capacity.
And finally, each establishment can also set certain requirements that are specific to them. An assessment will be made according to the debtor's debt ratio.
To have access to his first residence even one with a modest income, there are many possible financing options to make his real estate project a reality. Discover the different real estate loans available.