Anyone who wants to sell their house or apartment to buy a new home often faces a challenge: the capital previously tied up is not yet available, meaning that the new property cannot yet be financed. One solution to this problem is interim financing. This is a bridging loan that banks grant for a period of a few weeks to two years.
Who decides on interim financing?
Not every bank grants a loan or credit for interim financing. Loans and credits with very short terms are more expensive for banks than those with longer terms. Therefore, the interest rates are also higher. It is also important to note that interim financing is only available for a minimum loan amount of $200,000. If the money from a building society savings agreement cannot yet be allocated, you should ask the building society for solutions.
How interim financing works smoothly
First, the sales contract must be notarized and the owner must have their land charge entered in the land register. This serves as collateral for the bank. If you are selling your old house or condominium to finance a new property, you should find a new owner as quickly as possible. This is because even a draft contract that has already been drawn up by a notary reduces the financing costs. If the money from the sale is not yet available, it is helpful for the bank if this draft contract specifies a fixed date when the money will be received. The total financing should be well calculated, because a sales price that has not been calculated correctly can be expensive – and anyone with incomplete financing must expect to have to arrange additional financing. It is therefore always advisable to consult a specialist who is well versed in financing issues.
Step by step to successful interim financing
1. Planning
Before taking out interim financing, you should plan your finances thoroughly and ensure that you are able to repay the loan within the agreed period. You should also take into account any potential risks and unforeseen circumstances.
2. Comparison
Compare different offers for bridge financing and choose the one that best suits your needs and goals. Pay attention to the interest rates, terms, fees, and conditions of the various offers.
3. Negotiation
Negotiate the terms and conditions of the bridge financing with your financing partner. If you have a good credit score and are able to make a larger down payment, you may be able to negotiate better terms.
4. Hedging
Ensure that your interim financing is adequately secured by having your collateral, such as real estate or other assets, appraised. This can help you obtain better terms and lower interest rates.
5. Repayment schedule
Create a repayment plan for your interim financing and stick to it. Make sure you are able to pay the monthly installments on time to avoid delays and additional costs. Also plan for the event that you need to repay the loan early.
Are you looking for the right real estate financing? Then we will find the right financing partner for you!
Overall, bridge financing offers a flexible and secure option for bridging liquidity gaps when purchasing or constructing a property. As a real estate agent with a large network, we help our clients find the right financing for their real estate project and are there to provide advice and support. Contact us today.