A bridging mortgage is a type of mortgage that allows you to purchase a new house or apartment while you are still repaying the mortgage for your current home, which you intend to sell. This way, the new mortgage taken out will cover the cost of the property to be bought, plus the outstanding amount of the loan for the current property, as well as management costs related to the operation.
From the time this mortgage is taken out, you will have 2 to 5 years - depending on the terms and conditions - to sell the previous property. Thus, during the years of the mortgage lifecycle, you will have to pay one of three kinds of instalments:
- Interest only payments: as well as a grace period in a current mortgage, by paying this instalment you will only have to pay the interest on the loan, which means the outstanding capital to be paid is not repaid, even if its cost is lower than that of the normal instalment.
- Special reduced payment: the amount of the instalment will be considerably lower than that of instalments after the sale of the original property, and the majority of the money invested will be used to pay interests.
- Standard payment: capital and interests are repaid as normal.
In addition, a bridging mortgage allows you to get funding for up to 100% of the value of the new property, as well as to cover the associated costs, provided this does not exceed 80% of the total value of both properties.
Meanwhile, the repayment period can be up to 40 years, and the banking institutions do not tend to charge a commission for partial repayment after the sale of the first property.
The requirements for granting this type of mortgage are no different from those needed for a current mortgage, whether fixed or variable. This includes standard notarial, registration, and tax procedures, proof of the holder's creditworthiness and valuation of both properties, among other primary costs.
However, the guarantees requested for granting a bridging mortgage are normally higher, given that it is a banking operation that entails a greater risk for the institution.
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