Bridging mortgage
Are you about to buy a new home, while your old home has not yet been sold? With a bridging mortgage, you can already use the expected surplus value for the financing (mortgage) of your new abode. In this article, we explain everything about the bridging loan: from the conditions for applying for the loan to the amount, the duration, and the costs.
Go straight to:
- What is a bridging mortgage?
- When do you choose a bridging mortgage?
- What are the conditions for closing a bridging loan?
- How much bridging credit can you get?
- What is the term of a bridging mortgage?
- What are the costs of a bridging mortgage?
- Frequently asked questions about the bridging mortgage
What is a bridging mortgage?
If you buy a new house while your old home has not yet been sold, you will temporarily have two houses. To finance the new home, you probably want to use the surplus value of your old home. Many homes have surplus value because the market value has increased or a portion of the mortgage debt has been paid off.
Because your old home has not yet been sold, you cannot yet use this surplus value for financing. But very nice: a bridging mortgage allows you to do that. This mortgage anticipates future events. It is a temporary loan that bridges the period between the purchase of your new home and the sale of your old home.
The mortgage provider lends you (a percentage of) the expected selling price of your old home. This amount is seen as "own money", with which you can finance your new home. You repay the bridging loan when you sell your old home.
This type of mortgage is interest-only. This means that you do not make monthly repayments, but only pay interest on the loan amount.
When do you choose a bridging mortgage?
A bridging mortgage is useful if you need the surplus value of your current home to finance your new home, but your old home has not yet been sold. It makes it easier for you to finance your new home, which gives more certainty and less worry. Moreover, you can get better conditions when closing your new mortgage.
Additional benefits are:
- You reduce your double monthly costs. If you don't take out a bridging mortgage, you have to arrange the full financing of your new home yourself. This results in higher monthly costs until your old home is sold. With a bridging mortgage, you can reduce your monthly costs by being able to use the expected surplus value. Read more about a double mortgage.
- You have more time to arrange your move. Without a bridging mortgage, you probably have a lot of hurry with selling your home and arranging the move. You want to get rid of the double costs as soon as possible. With a bridging mortgage, you have the time to tackle everything at your own pace. That is nice; moving is stressful enough in itself.
- You can move faster in case of divorce. In the event of a divorce, both partners often want to occupy their own home as soon as possible. A bridging mortgage allows the moving partner to buy a new home and already use the required surplus value for financing. It is necessary that both partners give permission for the bridging mortgage.
What are the conditions for closing a bridging loan?
If you want to take out a bridging mortgage, you must meet certain conditions. First, you must be able to demonstrate that your old home has surplus value. You can arrange this through an appraisal report, through a WOZ decision, or through a sales agreement. The expected selling price of your old home must be higher than the remaining mortgage debt.
Secondly, you must be able to demonstrate that you can bear the temporary double housing costs. You must show that you have sufficient own resources to pay the additional costs during the term of the bridging loan. Think about having enough savings or enough income (the mortgage provider will compare your income and expenses to calculate whether you have enough left over).
Sometimes there is an age limit
Good to know: some mortgage providers set a maximum age for closing a bridging mortgage. Often this limit is around the age of 70 years. This age limit gives banks more certainty that the bridging loan can be repaid within a certain period. They also take into account the life expectancy and financial stability of the applicant.
The specific conditions can differ per mortgage provider. Contact a mortgage advisor to set out the different possibilities and find the most favorable options. Read on about what to expect from a mortgage discussion and how to handle the comparison of mortgage advisors.
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How much bridging credit can you get?
The amount of the bridging credit depends on the status of the sale of your old home and the conditions of the lender. If your old home has already been sold on paper, you can get a higher bridging credit than when the home is still for sale.
Have you already sold your old home?
If your old home has already been sold (on paper is enough), then the bank knows exactly what the sales proceeds will be. As a result, the bridging credit can be equal to the sales price minus the mortgage debt minus the sales costs. Most banks use a standard percentage of 3% of the sales price as sales costs.
Example calculation:
Bridging credit = sales price - mortgage debt - 3% sales costs
- Sales price old home: €400,000
- Remaining mortgage debt: €275,000
- Sales costs: 3% x €400,000 = €12,000
- Bridging credit: €400,000 - €275,000 - €12,000 = €113,000
Have you not sold your old home yet?
If you haven't sold your old home yet, or if the suspensive conditions are still in effect, then most banks maintain a safety margin. The exact sales proceeds are not yet known. Usually, you can borrow a maximum of 90%* of the appraised property value minus the mortgage debt.
*Note: some mortgage lenders have a larger safety margin. Generally, the percentage is between 80% and 90% of the appraisal value.
Example calculation:
Bridging credit = 90% of appraised value - mortgage debt
- Appraisal value old home: €400,000
- Remaining mortgage debt: €275,000
- Bridging credit: 90% x €400,000 - €275,000 = €85,000
What is the term of a bridging mortgage?
The term of a bridging mortgage is usually between 12 and 24 months. So you have a limited period of time to sell your old home. After this period, the credit must be repaid. If you haven't managed to sell your home within this period, you can ask the bank for an extension of the term.
Possible extension of the term
Most banks offer an extension option, but start the conversation in time. If the bank does not agree, you will need time to find another way to repay the credit. Think about taking out a new mortgage or asking for help from family or friends.
Always seek advice from a mortgage advisor when taking out a bridging mortgage. This professional helps you understand the specific conditions, find the best mortgage provider, and explore alternative financing options (if necessary).
The bridging mortgage and new construction
When buying a new construction home, taking out a bridging mortgage can bring specific challenges. Because new construction homes are usually delivered after a while, it may be necessary to extend the bridging period.
It is wise to seek mortgage advice, as not all banks have the same conditions for bridging mortgages for new construction homes. The mortgage advisor can also help you with planning and weighing the different options, so you can confidently face the upcoming period.
Read more about selling a home with new construction.
Are you planning to buy a new home or sell your old one? With Mijn Verkoopmakelaar, you can easily and quickly find the best real estate agents in your area. Register for free and receive non-binding proposals from real estate agents in your inbox. You can also request a mortgage conversation with a mortgage advisor through our platform free of charge. Discover how Mijn Verkoopmakelaar works or sign up directly.
Find a purchasing agent- Free & without obligation
- Contact via email
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What are the costs of a bridging mortgage?
With a bridging mortgage, you pay interest, which can vary per lender and is usually higher than the interest on your regular mortgage. It is useful to know that many banks apply a variable interest rate for the bridging loan. This can make it difficult to determine the exact interest costs in advance.
The interest you pay on a bridging loan increases your monthly expenses. But the interest is usually tax deductible. It is wise to check with a financial advisor whether you can bear the higher costs, also considering the possibility that the sale of your old home may take longer than expected.
In addition to the interest costs, you may also face other costs, such as advisory costs to your mortgage advisor or costs for closing the bridging mortgage. Always ask in advance about the costs, so you know what to consider and can weigh it in your decision to close the mortgage.
Read more about the cost of a mortgage and the costs of a mortgage advice.
Discover more about mortgages:
Frequently asked questions about the bridging mortgage
Where do you apply for a bridging loan?
If you also need a mortgage to finance your new house, then you apply for the bridging loan from the same mortgage provider. Are you going to buy your new house without a mortgage? Then you can try to apply for the bridging loan from your own bank. This is called a standalone bridging mortgage.
There are very few providers that offer standalone bridging loans. The vast majority of providers only make a bridging loan possible in combination with taking out a mortgage on the new house. Engage the help of a mortgage advisor to discuss the options.
What interest do you pay on the bridging loan?
The interest you pay on a bridging loan can vary, depending on the lender and the specific terms of the loan. Generally, the interest on a bridging loan is higher than that of a regular mortgage.
Many banks use a variable interest rate for bridging loans, which means that the interest rate can change during the term. This can make it difficult to predict the exact interest costs during the bridging period. Therefore, it is advisable to closely examine the interest conditions and seek advice from a mortgage advisor.
Is the interest on a bridging mortgage deductible?
Yes, the interest on a bridging loan is generally tax deductible, just like the mortgage interest on a regular mortgage. This means that you can declare the paid interest as a deductible item on your tax return, which can result in a tax benefit.
It is wise to discuss specific tax situations with a financial expert to confirm that the interest on your bridging loan is indeed deductible.
Can you extend the duration of the bridging loan?
In most cases, it is possible to extend the duration of the bridging loan if your old house has not been sold within the set term. It is important to contact the lender in time to discuss the extension and consider any alternatives if an extension is not possible.
What if you can't sell your house after the bridging loan?
If you can't sell your old house and you can't extend the credit, you'll have to look for alternative financing. A financial advisor can assist you in this matter. Consider, for example, taking out a loan from family or friends. Seek advice from a financial advisor to ensure that this loan is arranged properly.
Although it's not desirable, some people choose to move back into their old house and sell their new one. Also read our tips for preparing your home for sale and sprucing up your home for sale. Find out also the ways you can sell your house quickly.
What if you haven't used the bridging loan?
If you have taken out a bridging loan but ultimately do not need it, you do not have to pay interest as long as you do not withdraw any money. But beware: any other costs, such as closing costs and advisory fees, you do have to pay.