If you purchase a new home before your old home has been sold and you do not have sufficient financial resources, you will need a bridging loan. This is because you will be entering a period in which you have already taken out a new mortgage on your new home, but have not yet repaid the old mortgage because your old home has not yet been sold.
Bridging loan
A bridging mortgage or bridging loan is a loan that bridges the period between the purchase of your new home and the sale of your old home. You pay interest on the bridging loan. This interest is often slightly higher than the interest on your mortgage. It is a temporary, interest-only mortgage. As soon as your old home is sold, the bridging mortgage is paid off.
A calculation example:
- Bert has purchased a new home for €300,000.
- He is selling his old house for €250,000. There is still a mortgage of €150,000 on the property. This means he will make a profit of €100,000 on the sale.
- The transfer of the property at the solicitor's office has not yet taken place. At this point, Bert is €100,000 short of the amount needed to purchase his new home.
- To bridge this gap, he needs a bridging loan of €100,000.
- As soon as his old home is sold, the bridging loan will be repaid.
Free consultation
Are you looking for your new dream home and would you like to know more about the financial options? That's possible. Schedule a free consultation with one of our advisers and we will be happy to explain all the options. It is also possible to have us perform a free remote check first.