According to the Bank, a bridge loan is “a loan obtained as temporary financing and with the guarantee of a future income of the borrower. In the mortgage loans, when it is granted, it will be repaid “. That is, a bridge mortgage is a type of mortgage loan that allows the user to move from one home to another without the need to sell in a hurry the first one .
This mortgage, also called “home exchange” , allows you to obtain up to 100% of the purchase price of the new home and is a temporary financing until the client obtains an income (the capital received from the sale of his house).
In this way, the user acquires in a single loan the 2 that he needs, thus obtaining a mortgage greater than the first one that had contracted and that is divided between the house that is bought and the one that is sold, but without having to face At a higher interest rate .
How Does A Bridge Mortgage Work?
With this type of mortgage loans the same entity grants a single client 2 mortgages (in a single) until he sells the first home. Until that happens, the user can pay a reduced fee that equals the interest of the total outstanding capital through quotas that, in many cases, can be modulated according to the situation of the interested party. Once sold the part of the loan that corresponds to the old house is canceled and the traditional mortgage for the new one is formalized , that begins to be paid with normality.
In short, the bank anticipates the money necessary for the acquisition and agrees to wait a certain time until the client sells his house.
How Long Does It Take To Sell The House?
These products usually have a grace period ranging from 6 months to 5 years (depending on the entity) in which the only payment they have to deal mortgaged is that the costs of the loan, ie, That only interest on the loan is paid . Thus, the indicated time to sell the house will be one that is set as lack, as if not to have disposed of the property when that period the customer must meet the payment of common mortgage payments end, Which will be higher than the one you had at the beginning to be the much borrowed amount. However, it must be taken into account that some entities do not have this lack.
How Is The Mortgage Payment Guaranteed?
The guarantee that the bank obtains that the loan will be paid is double with a bridge mortgage, since although the total increases and therefore the risk of default is higher, the guarantee against insolvency is in the 2 properties of Which the client has.
What Happens If The First Home Is Not Sold?
As we say, bridge mortgages are hired to acquire a second home while trying to sell the first, but what if this is not achieved? In the event that the grace period expires, in which only the expenses of the mortgage are paid and the house is not sold, the client must begin to pay the amount that the bank financed from the beginning. That is, after that period of time you have to start paying the normal mortgage payments even if the property has not been sold.
Advantages And Disadvantages
The advantage of getting a bridge mortgage rather than 2 different mortgages is that you do not need to sell the home in a hurry, a situation that can lead to “malvenderla” . In addition, the fee for the loan is not as high as if they had 2, since you can pay less while the first is sold and then the mortgage is adjusted to the capital pending payment of the second.
The other side of the coin is the drawbacks , and because it is an operation that carries more risk for the entity, to grant these home exchange loans usually require a client profile with greater solvency than for a traditional one .
A Home Change Loan
As an example, if the second mortgage is for a dwelling on a flat, the bridge loan will take into account the amount that adds the entry required for its purchase and the necessary payments in addition to the outstanding amount of the previous one. However, in the case of an already built house, the mortgage will be set up according to the sum of the outstanding amount of the house for sale and 100% of the cost of the purchase (unless the client has money in Effective to decrease it).
Buy The Home You Need
When buying a home you have to think carefully about the requirements you must meet: number of rooms, parking space, lift, bathrooms, kitchen size, the area in which you are. But once you find the perfect house It is time to pay . Most likely you will not be able to do it, so you will have to ask for a mortgage. Learn more how to choose the one that suits you best, Quick Bridge Funding puts at your disposal a mortgage comparator . Analyze the commissions, clauses , requirements and get with your ideal home.