With a bridge mortgage you can join 2 mortgage loans in use only until the house is sold.
The fees payable by the user are less than 2 mortgages and gives the user a time to sell the house that already had mortgaged.
Buying a home is a great decision. The mortgage payments, the costs associated with it and the related products are expenses that must be counted when choosing the house and the loan that is needed. When you buy a house you choose the one that fits the needs of the future owner. It is possible that at the time of acquiring it only two rooms are needed, or a particular area of the city is preferred, but later a larger house is required or in another area or locality. What if, with the passage of time, but still having part of the mortgage, you decide to buy another home? Is it necessary to sell the first to be able to buy the next one? The answer is “No”. To solve these crossroads exist the bridge mortgages.
Buying a home while you are paying for another
Through a mortgage loan a credit institution lends the user an amount of money in exchange for it to be returned in the long term through installments along with interest. In the case of non-payment of the mortgage, the bank can keep that address in order to recover the amount that is pending collection.
When buying a second home when you are still paying for another, there are 3 options:
- Wait to sell one to buy the other: it may mean “losing” the one you want to acquire because the time needed to sell a home can be lengthened.
- Request a new mortgage: it would face the payment of 2 mortgages and it is common to find difficulties when an entity grants the client a mortgage having another in force. Banks usually request that the user have a minimum of 20% of the purchase price and another 10% for expenses, and this is dedicated to the purchase of the first home, so it will require a very high income to achieve a second.
- Hiring a bridge mortgage : this way it is not necessary to sell the mortgaged home first, since two guarantees are acquired in a single loan: the one of the house that is already being paid and the one that is wanted to buy. This gives a term of between 2 and 5 years to sell the current house.
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 that the mortgaged have to pay is that of the expenses derived from the loan, that is, That only interest on the loan is paid . Therefore, the time indicated to sell the house will be the one that is fixed as lack, since in the case of not having disposed of the property at the end of that period the client will have to face the payment of the common shares of the mortgage, 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. 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, and the area where you are … But once you find the perfect house it is time to pay. Analyze the commissions, clauses, requirements and get with your ideal home.