What is bridge loan?

The bridge loan is a type of mortgage loan that allows you to offset the expected income from the sale of a first real estate to finance the second.

 

General principle

You already own a house and want to sell it to buy another property , because the family is growing, you have changed jobs, or you have simply found a home that suits you better.

However, to acquire your new building, you absolutely need to finance it with the proceeds from the sale of the first one. You do not have the opportunity to wait until the sale is completed because you have found the house of your dreams.

In this case, you can ask your loan organization to grant you a bridge loan until your first real estate has been bought by a third party.

Functioning and feasibility

The bridge loan is a temporary loan with a term of up to two years and during which you only pay interest. This duration varies according to the loan institutions. The day the deeds of sale of your first real estate are signed, your notary will close the bridge loan by repaying it directly to your loan institution.

Before subscribing to this type of loan, it is essential to evaluate your payment capabilities , since they will be adapted to your new situation.

More expensive than a conventional mortgage loan

The interest rate applied meets the same conditions as those of a conventional mortgage loan, but it is obligatorily fixed . However, you have to somehow face the repayment of two real estate for a while. The amount paid monthly will therefore be higher than in the case of a single mortgage, for a single dwelling.

Also note that the bridge loan does not qualify for a tax deduction , unlike the mortgage loan. Do not hesitate to ask your banker for advice on the most suitable formula for your needs.

Do you want to subscribe to the bridge loan? Conduct a mortgage simulation or send us your loan application online .

Leon Kaplan Author