Buying a new property without waiting to have sold the old one: on paper, the idea appeals.
In fact, it is based on a precise mechanism, the acquisition bridging loanwhich banks grant with caution in a still demanding credit context.
A transitional credit based on the value of the property to be sold.
The bridging loan allows you to finance a new acquisition based on the estimated value of the current property. Concretely, the bank advances part of the expected sale price, generally between 60% and 80%, in the form of short credit, while the transaction is completed.
It is a transition tool, not long-term financing. The duration is in fact limited, often between 12 and 24 months. During this period, the borrower only repays interest and insurance. Two options exist: either the borrower repays this interest and the insurance each month, or he opts for a total deductible and only pays the insurance during the term of the loan.
In this case, capital, and interest is repaid in one go when the property is sold. In any case, the bridging loan is based on “ultimate” repayment.
In its “acquisition” version, the bridging loan is often supplemented by a traditional real estate loan to complete the financing. The whole must respect the usual banking criteria, in particular a tdebt capped at 35%.
Stricter grant conditions than before
Since the rise in rates, establishments have become more selective. The key remains the estimate of the property for sale: it must be realistic and often validated by several professional opinions. Banks now apply larger security discounts, observes Vousfinancer.
Result: the relay amount is sometimes lower than the sellers’ expectations, with some banks being able to go as low as 50% of the estimated value depending on the risk.
Another point of vigilance: the capacity to support a double temporary load. Even if the bridging loan limits the monthly payments, certain profiles may find themselves in financial tension if the sale is delayed.
An effective tool… but to be handled with care
In a market where sales times have lengthened, the main risk remains not selling on time. The borrower must then renegotiate your creditextend the relay, often under less favorable conditions, or review its selling price.
To limit this risk, professionals recommend anticipating. According to CAFPI, The bridging loan works well when the property is already being marketed, or even under offer. Some banks also offer more flexible options, but these options have a cost, which is added to that of a loan that is already more expensive than two years ago.
Ultimately, the acquisition bridging loan remains a real estate project accelerator, provided it is carefully calibrated. In a more uncertain market, it can no longer be improvised: fair estimation, sales strategy and support become decisive to prevent leverage from transforming into risk.
