Understanding the bridging loan?

The bridge loan is an advance made by the bank to its customers, with funds to be received and that agree to repay the advance. The most common form of bridge loan bridge loan is real estate. This credit can prevent the proceeds from the sale of a property before they cashed the money and even before the sale is completed effective ¬ ment.

A bridge loan can seduce you if you own a home and want to sell it to acquire another. It enables you to make the purchase without waiting for the old good is sold.

You have a deadline to complete the sale at the end of which the bridge loan is repaid through a portion of the proceeds of such sale.

You put a property to sell, such as an estate agent, at a price specified in the warrant that you have given to this agency. With the bridge loan, the bank now makes you an advance to help you buy another property.

You repay the advance when the property is sold and no later than a date specified in the contract. This bridge loan is commonly added to a conventional mortgage to finance the new purchase.

The bank do not yield a bridge loan for the total sale price of the property.

The amount of the advance is usually held on the situation: If you already have a buyer, with an agreement signed, let alone if it has no conditions precedent, the credibility that the sale is realized for the amount provided on time is strong and your bank will usually make a larger advance.

However if you only have filed a sales mandate in an agency and that for the time you do not have any potential buyer, it is important to keep a safety margin and the bank will make an advance limited by example from 60 to 70% of the evaluation of the well, as you may have to lower the asking price if buyers are scarce or if the market deteriorates.

The bridge loan is always granted for a specified period and therefore includes a deadline. Part of the funds from the sale shall be deemed received by the bank to repay the bridge loan on or before that date.

Of course, if the sale is made before that date, the bridging loan is repaid upon receipt of funds from the notary to help you avoid paying unnecessary interest.

The payment is made prior to maturity without penalty. In practice, the bridge loans offered by banks are generally due to one or two years.