The financing of numerous construction projects and real estate purchases are kept simple. A loan is taken, which covers the outstanding costs. But sometimes it gets complicated, especially if the owner or buyer already owns a property, but still has to sell it. If the sale of the existing property is not completed on time, a financial bottleneck is imminent. So that it does not come to that, the bridging finance helps further.
The typical reasons for a bridging loan
The main reason why some builders and shoppers depend on interim financing is always the same: they have committed equity that they can not currently use. Here are two typical examples.
Property sales : It happens that homeowners are not satisfied with their existing property and therefore want to sell them. Of course, it would be best to first sell the existing property and then use the sales proceeds as equity for the acquisition of the other property. But in the meantime, it is important to live somewhere, which is why it is often preferred to buy the new property directly and then sell the existing property.
Inheritance : Heirs can be complicated and tedious. While there may be a claim to inheritance, it can sometimes take a long time for capital to enter the account. Accordingly, it may also be appropriate in such cases to conclude a bridging loan.
Financing process in practice
Usually, both loans – ie the loan for the new property and the interim financing – are applied for in parallel. This ensures that the loan amount from the bridging loan is available on time and can be used as equity.
Funds used for bridging finance are usually raised in the form of variable loans. The reason is that you can repay such a loan completely at any time. As a rule, the demand is only short-lived: as soon as the existing property is sold or the money from the estate is available, the loan from the interim financing is no longer needed.
What to look for in the loan application
When taking loans, it should be noted that the bank also demands sufficient provision of collateral here. In the case of a property that is for sale, this is usually no problem. The loan, which serves as interim financing, is secured by mortgage. For inheritances, finding a workable solution to secure the loan is much more difficult.
Usually, both the long-term loan and the sub-loan are taken up by the same bank. However, this does not necessarily have to be this way. Taking into account feasibility and conditions, it may also be appropriate to finance with two different banks.
Before each lending, the banks set up a household bill. In it they determine whether the applicant is able to repay his loan easily. Who decides on a bridging loan, must consider one thing: Temporarily installments for the long-term real estate loan and the interim loan due. This means an increased monthly burden on the budget, which in turn can make it difficult to obtain a financing commitment. Therefore, the amount of income is usually of great importance.
With us unerringly to the appropriate interim loan
Are you looking for a bridging loan or would you like to know more about your exact options? We are happy to help, our consultants work with you to find the right financing solution and compare conditions on the market. The goal is to find a tailor-made and at the same time favorable interim loan. We look forward to your inquiry.