Time flies so fast. It has been years since you bought your first apartment. What were you proud of then. Now you start to grow considerably and it is time to buy a bigger house. Resolutely you put your apartment for sale and you go looking for the ideal new home. After a while searching and viewing you will fall in love with a house. There is, however, a problem: you have not sold your old apartment yet. And that while you need the surplus value of your apartment for the financing of the new house. Bridging credit has been created for this type of situation.
What is bridging loan?
A bridging loan singapore or a bridging mortgage is a temporary loan that you can take out if you buy a new house, while the surplus value of your old house has not yet been released. This is the case if you have not yet sold your old house, or if you have sold it but the transfer has not yet taken place. Awkward, because if you have surplus value at your old home you need it to finance your new home. But what is surplus value? Overvalue is the value of your old home, minus the mortgage debt that still rests on your old home. With a bridging mortgage you borrow this amount, or part of it, from the mortgage provider where you also arrange the mortgage for the new house.
Calculation example bridging loan
Suppose you own a property with a value of € 200,000. The existing mortgage on this property is € 150,000. This would give you € 50,000 of surplus value after the transfer of the house. You have a new home on the eye worth € 220,000.
Old home is not yet sold
If your old home has not been sold, many mortgage lenders use a percentage, for example 85%, of the probable proceeds for the calculation of the bridging mortgage. Your maximum credit is € 200,000 x 85% – € 150,000 = € 20,000.
Old house has been sold
Has the house been sold but has the surplus value of € 50,000 not yet been released? When providing the bridging mortgage, the selling costs of the home are also taken into account. For example, mortgage lenders can use 3% for this. € 200,000 x 3% – € 6,000. Your maximum credit is € 50,000 – € 6,000 = € 44,000.
Reluctant with bridging mortgage
In practice, mortgage lenders are reluctant when it comes to bridging loan singapore. They have no certainty that you actually receive the surplus value on sale. In addition, you do not get endless time to still sell your old house. The maximum duration of a bridging mortgage depends on the conditions of the lender and varies from six months to two years.
Are you eligible for bridge financing? Prepare yourself for high monthly mortgage payments. You pay not only the mortgage payments of your new house and your old house, but also interest on the credit. In addition, you sometimes pay notary fees and costs for closing.
The interest you pay on the bridging loan singapore is higher than that of a regular mortgage. This is what mortgage lenders have established because they are at extra risk if they provide you with a bridging loan. It can take (too) long before you sell your old house. And how about the possibility that you receive less for the house than you had expected in advance?
Interest bridging loan is tax deductible
The interest you pay on the bridging mortgage is often tax deductible. The condition is that you take out the credit for your own home. It may not be a recreational home, but it should really be your main residence.
The loan is a repayment-fee loan. You might think that means that you do not have to repay the loan, but that is not the case. If only it was such a party! What that does mean is that you do not redeem during the term. You do not do that until you sell your old house and the transfer has officially taken place at the notary. With the money that is then released, you cancel the bridging loan in one go without penalty.
Bridging loan: wise or not?
With a bridging loan you can bridge the period between buying a new house and selling your old house. However, you will not receive this loan from your mortgage lender. If you have not yet sold your old house, mortgage lenders are very reluctant to pay the expected surplus value. That’s a lot easier if you’ve already sold your old house.
Are you still in the situation that your old house has not yet been sold, but you have already found a new house that you would very much like to buy? Then especially with a mortgage advisor in conversation. He can advise you on an appropriate solution based on your data. With an adviser from Knab, a telephone inventory interview is free and without obligation.