Bridging loan
A cash advance that lets a buyer acquire a new home before selling the current one. The bank typically lends 50–80% of the estimated value of the property for sale; the principal is cleared once the sale completes. A useful tool to handle carefully: a long selling delay can weigh heavily on the budget.
Key points
- A bridging loan advances the proceeds of the current property's sale to finance the future acquisition.
- The bank typically lends between 50% and 80% of the estimated value of the property for sale.
- Interest is often capitalized (full grace period) or paid monthly (partial grace period).
- The term is short, typically 12 to 24 months, with a possible extension if the sale takes longer.
Frequently asked questions
How does a bridging loan work in practice in a buy-then-sell transaction?
The borrower has their current property valued by the bank, which advances a percentage of that value as a bridging loan. This advance is used as a deposit to finance the new property, often combined with a complementary long-term loan. As soon as the first property is sold, the sale proceeds clear the bridge. During the interim period, the borrower may pay interest only or capitalize it, depending on the arrangement.
What risks should a broker analyze before recommending a bridging loan?
The main risk is the selling timeline: if the property does not sell within the expected period, the borrower bears the cost of both the bridging loan and the new loan simultaneously, which can weigh heavily on their cash flow. The broker must be realistic about the estimated sale value (avoid overvaluations that increase the risk of a long sale) and ensure the borrower can financially absorb an additional 6-month selling delay without difficulty.
What is the difference between a standalone bridging loan and a combined bridging loan?
A standalone bridging loan is used alone, when the value of the property for sale fully covers the new property's price: the borrower does not need additional credit. A combined bridging loan is coupled with a long-term mortgage because the value of the property for sale alone is not enough to finance the new property. This second configuration is by far the more common and requires structuring both financings simultaneously with coherence.
In practice
A homeowner whose property is estimated at €300,000 obtains a bridging loan of €210,000 (70% of estimated value) to acquire a new home at €380,000: coupled with a long-term loan of €170,000, they can buy before selling and repay the bridge as soon as their former property's sale completes.
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr