The continued indebtedness of Spanish families, mainly due to the increase in housing prices and the rise in interest rates on mortgage loans, has caused the emergence of countless financial products to meet these expenses, with the consequent benefit (commissions, opening, and cancellation) for boxes and banks.
The bridge loan is one of them and is characterized in that it allows obtaining the necessary financing to buy a house, usually on the plane, without selling the one that is inhabited in a hurried way.
This money is mainly used to finance reservations
And other expenses must be made prior to the signing of the deeds. The main novelty is that it is a personal credit obtained as temporary financing that is canceled and becomes a mortgage with the delivery of the new house. At that time it also usually increases its amount and the repayment term.
Although it may be the solution for many families, before hiring it should be taken into account that it is a complex operation for most users, who are advised to advise, compare offers and test their negotiation skills to be able to agree on conditions more advantageous
In no hurry to sell
The mortgage product is popularly known as “bridge credit” is presented as a solution to buy a home without having to previously sell what is being inhabited. This operation is about synchronizing the purchase of a new house – an acquisition that does not necessarily have to be “on the plane”, although it is the most frequent practice – and the sale of the current one.
For this, a personal loan is initially formalized, with a temporary term that ends with the constitution of a mortgage loan after the delivery of the house purchased to the developer and still not built. With the money of this personal credit, it is easier to cover the entrance and to face possible reforms, renovation of the furniture, transfers, expenses, taxes of the purchase, etc. The necessary financing is thus obtained to be able to sell the current dwelling without a hurry.
From the Department of Banking of Private Individuals of Caja Laboral, Ibon Urgoiti describes that the acquisition of new housing is normally carried out on plan or under construction so that a long period of time will elapse until the client sees it completed. It will be then when the promoter will carry out all the necessary legal procedures to actually transfer the property to the buyer through a public deed.
Until that time, the buyer will not be the owner of the house so he will not have the possibility to request a mortgage. However, the usual practice of the real estate market is usually that the buyer of the new home has to disburse a high percentage over the total price, already at the time of the private contract of sale, and even later, with additional disbursements during the period of construction of it.
“For this reason, if you do not have that money, which in large part of the occasions even exceeds 30% of the price of the house, you can apply for a bridge loan that allows you to meet these initial and subsequent disbursements, without having to return the money until the moment you sign the deed of purchase and the corresponding mortgage, “Urgoiti explains.
In this case, in general, the property is “mortgaged” as a guarantee of a personal loan. The bridge loan will be canceled after obtaining a definitive mortgage on the new home. When the buyer receives the new property, he will sign a conventional mortgage, usually for a greater total amount and with a much longer repayment term. “There are no public statistics on specific products,” warning from the Spanish Mortgage Association (AHE). And while it seems that this financing is not one of the most publicized and offered by banks, it is also true that almost all of them provide it to their customers.
Steps to close this type of operations
Do not forget that despite being able to access this financing instrument – as explained by Fernando Herrero, vice president of Association of Users of Banks, Savings Banks and Insurance (ADICAE) – these situations are a source of risk for users because although they have signed a contract for the sale of the current apartment and received the penitential earings (signal), they feel pressured to not have sold their house definitively and to be obliged to deliver a significant amount of money to reserve their future home, with deadlines They can lengthen a lot in time.
Normally savings banks and banks offer financing of up to 80% of the value of the new house, according to an appraisal, although some advertise up to 100%, and even up to 80% of the sum of the appraised value of both, the current one and the one you are going to buy.