WHAT A BRIDGING MORTGAGE IS AND WHAT IT IS FOR

Find out how the bridging mortgage can help you when buying a property.

A bridging mortgage will allow to buy a new property meanwhile your current property is on the market..

It is a type of banking product consisting of a loan used by people who need financing within a particular context,since its duration is short and due when the definitive mortgage loan is granted. This type of loan is called a bridging mortgage.

Indeed it would be the first part of a long term subsequent mortgage. . . ..

HOW THE BRIDGING MORTGAGE WORKS

This type of loan allows to combine two different mortages in the same contract. In this way, the current mortgage is beeing paid at the same time together with the new one for the property adquired.

It is very importat to know that in case of non-compliance with the established terms, it would be possible to loose both properties, meaning that if the terms are not properly calculated it will be a high-risk transaction..

The set time for a bridging mortgage will be 2 and 5 years.. During that period the bank will give some facilities for the payments.

Once the first property is completed sold, the bridging mortgage becomes a conventional mortgage.

REQUIREMENTS SET OUT

First the bank will analysis the financial creditworthiness to know the abailability to pay. Usually the bridging mortgages will not be more than 80% of the appraised value of the two properties. Exceptionally could be the 100% of the new property in cases that the debt of the currect property is low.

QUOTA SYSTEMS

LACK OF CAPITAL

Only the interest on the debt is paid, so the capital will not be amortized.

REDUCED FEE

Lower than normal installments, a large part will be for the interest payments.

NORMAL FEE

Normal installment payment, just like in a conventional mortgage.

ADVANTAGES AND DISADVANTAGES

The positive point in this type of mortgage is that will allow some flexibility when selling the current property, since there will be the chance of begnining to buy a new property as soon as an offer is received and in that moment start to pay the mortgage.

The negative part is that there is a deadline to formalize the sale of the old property, a maximum of 5 years and the bank wil also require a high creditworthiness.

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Check with your trusted bank if you might be interested in a bridging mortgage, in the case of selling a property and buying another, both with mortgage.