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Buying before selling, with or without a bridging loan
Summary
For everything second accessing, changing your home requires choosing between two options:
- Selling before buying real estate remain the path of caution: you control your contribution, your budget is fixed. However, this strategy has a double logistical disadvantage: you have to rent a buffer home or rush your purchase decision under the pressure of the calendar.
- Buy before you sell provides access to a precious resource: time. This strategy is particularly interesting for those who want to buy a property to renovate in order to transform it in depth. This way, you have time to orchestrate the work and you only move once the new home is ready.
However, if buying before selling is a more comfortable solution, however, it has a significant financial weight because it involves holding two assets simultaneously and bearing the associated expenses. In addition, the mechanics only work if the sale of your initial property is smooth.
Choosing to buy before selling therefore requires good preparation and clarity on the value of your current property in order to avoid falling into a lasting financial impasse. At Maison Kyka, our real estate project managers can help you validate the feasibility of your operation and assist you in its execution.
“I have just purchased my second property and Maison Kyka took care of everything from A to Z.
From research to work, the architect managed to transcribe my need as I imagined but better!
The team is responsive and it allowed me to free up time for myself and to leave the work part with complete peace of mind!
Thanks again, I highly recommend it!“ Adrien Balikdjian
How to properly prepare the purchase before the sale?
Succeed in the process of buying before selling requires carrying out a precise audit in order to avoid a loan refusal or a situation of over-indebtedness. Concretely, you need to know:
- your real borrowing capacity
- the real value of your property.
Attention, it is essential to calculate your real borrowing capacity taking into account the credit you have taken out for your first real estate purchase. If you have not finished pay for your main residence At present, the outstanding capital will automatically reduce the envelope available for your new purchase. It is appropriate to ask your bank for an up-to-date amortization table to know your borrowing capacity.
In addition, you must apply the 70 % rule to calibrate your budget. A common mistake is to think that the bank will lend you the full estimated value of your current property. In reality, to protect themselves from a possible drop in prices, banking institutions generally only finance 70 % of the estimated value of your property (sometimes 80 % if a compromise has already been signed).
Concretely, if your apartment is estimated at €500,000, the bank will base the calculation of the bridge loan on an amount of €350,000. An objective and prudent real estate valuation is therefore essential: overestimating the value of your current property to inflate your purchase budget is a strategy that risks blocking your access to credit.
Buy before selling using a bridge loan
A bridge loan is the standard banking mechanism designed to bridge the gap between two properties. It is a cash advance on a future sale, generally lasting between 12 and 24 months. Depending on your financial situation and your renovation project, you can choose to subscribe to:
- A dry bridge loan
- An associated bridge loan
- An integrated bridge loan
- A bridge loan with total franchise
Finance the new purchase with a dry bridge loan
The Dry relay loan is a solution adapted to owners who have already repaid all (or almost all) of their current credit. Here, the bank simply advances the funds to you to buy the new property while waiting for the old one to be sold.
- Operation: The bank advances you a sum (50 to 70 % of the estimated value of your current property) to pay for your new purchase. You don't repay the principal, only the interest. Once your property is sold, you repay all of the capital at once.
- Advantage: It is a simple operation, with no commitment over 20 years.
- Disadvantage: As the bank makes little money on this type of credit, the interest rates for the dry relay are often higher.
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The associated (or backed) bridge loan: to move upmarket
This is the most common arrangement for first-time buyers who buy bigger or more expensive. It is necessary when the advance from the relay is not enough to cover the price of the new property.
- Operation: This arrangement combines two distinct loan lines: a bridge advance (short term) and a traditional real estate loan (long term, amortizable). Each month, you repay the interest on the bridge as well as the terms of the new traditional loan.
- Advantage: The bank generally offers an attractive interest rate on the relay part because it keeps you loyal with long-term credit.
- Disadvantage: The monthly effort is heavy. You combine the interest on the bridge and the monthly payment of the new credit, which can saturate your debt ratio.
The integrated bridge loan: to smooth out the financial effort
This technical solution is designed to bypass the debt limit. It is ideal if your income does not allow you to support the cumulative costs of the associated bridge loan.
- Operation: Unlike the “associated” bridge loan where the lines are distinct, here everything is merged into a global envelope. The bank smooths out your monthly payments so that they remain constant and bearable throughout the duration of the operation.
- Advantage: Your debt ratio is maintained, which makes it easier for the lender to accept the file. It is a secure solution for daily budget management.
- Disadvantage: This comfort comes at a cost. The smoothing mechanism generates an overall credit cost that is often higher than a traditional associated bridge loan.
The particular case of a bridge loan with full franchise
This solution allows you to protect your cash flow as much as possible, which is particularly interesting when it comes to financing renovation work in parallel with a buying real estate.
- Operation: During the transition period (12 or 24 months), you don't pay anything. No capital, no interest. Interest accumulates and is capitalized to be repaid all at once, in the same way as the capital, when the first property is sold.
- Advantage: You keep sufficient cash flow to pay artisans or assume the expenses of two homes without being asphyxiated.
- Disadvantage: The final cost is higher due to the interest capitalization mechanism (unpaid interest itself earns interest).
Need help choosing the best strategy? Tell us about your project and get advice from Maison Kyka.
“I was supported by Maison Kyka in the realization of my project and I am very satisfied with the result! All the teams listened to me and fully understood my expectations. I am delighted to have been supported by the Maison Kyka service and I advise anyone who wants to carry out a tailor-made and innovative real estate project to go for it!” Olivier Dhalluin
Buying before selling without using a bridge loan
When the debt ratio is blocked or the banking risk is too great, other financial and contractual mechanisms allow you to buy before selling. Here are the four alternatives to a bridge loan:
- The purchase-resale loan
- The long sale
- The suspensive sale clause
- Real estate porting
The buy-resale loan
Often confused with a bridge loan, this arrangement is technically different and is specifically aimed at owners who still have significant outstanding capital on their current residence.
- Operation: The bank buys back your old mortgage and integrates it into a new global envelope that also finances your new acquisition. It advances you up to 70 % of the value of your current property. You only have one line of credit and a single monthly payment.
- Advantage: This mechanism keeps your debt ratio under 35 % because the old credit disappears from the calculation.
- Disadvantage: The transaction involves additional costs: early repayment benefits (IRA) on the old loan and security fees on the new credit.
The long sale
Long selling is a contractual trick that moves the legal calendar. It consists in lengthening the he period between the signing of the compromise and the signing of the authentic instrument.
- Operation: You sign the sales agreement for your current property today but you set the date for handing over the keys (and payment) at a distant date, often 6 to 12 months later (compared to 3 months usually).
- Advantage: You don't need a bridge loan. The funds from your sale are available the day you sign your new purchase. In addition, this period offers you the time you need to carry out your renovation work before moving in.
- Disadvantage: It is difficult to find a buyer willing to wait so long, unless your property is exceptional or if the buyer is not in a hurry (investor, expatriate).
The suspensive sale clause
Rejected for a long time by sellers in tense areas, this clause is coming back in force in a market that is balancing.
- Operation: You insert a clause in your sales agreement stipulating that the transaction is subject to the sale of your own property before a deadline. If you don't sell, the compromise is void and you get your security deposit back.
- Advantage: The financial risk is zero. You don't make a commitment without being certain that you have the funds.
- Disadvantage: Your file is less attractive. A seller will almost always prefer a “firm” offer without this uncertainty.
NOTE
This solution may be interesting if you are looking to buy a property that has been on the market for a long time.
Property portage
It is a “last resort” or comfort solution for atypical profiles (entrepreneurs, retirees) that banks refuse to finance despite having solid assets.
- Operation: You are temporarily selling your property to institutional investors at a discount (around 70-80 % of its value). You receive the money that allows you to buy your new property but you stay at home by paying occupancy compensation (in other words, rent). Once your property is definitively sold at a third party at the market price, you reimburse the investors and cash in the difference.
- Advantage: The funds are released quickly with no income conditions or debt ratio. It is a solution based solely on the value of the asset (the mortgage).
- Disadvantage: The cost is very high. Between the initial discount, notary fees and porting fees, the operation is more expensive than a traditional bank loan.
Finance purchase and work before selling
Buy a property with work to be done involves a double financial burden: the acquisition of land and the cost of renovation. The classic mistake is to underestimate this envelope or to think of financing it later with a high-interest consumer loan.
How to include the work envelope in the overall financing?
The winning strategy consists in integrating all the work specifications from the start into your overall financing plan (backed bridge loan or purchase-resale loan).
- Operation: You present the estimated quotes from your artisans or your architect to the bank. This includes this amount in the long-term amortizable credit line (over 20 or 25 years). The funds are not paid into your account but released gradually upon presentation of business invoices.
- Advantage: You benefit from the real estate rate (lower than the consumption rate) and you smooth out the cost of work over a very long period of time, making monthly payments easier to bear.
- Disadvantage: The bank requires accurate quotes very early on, which requires having already validated the architectural project even before the final signature.
NOTE
Including renovation works in a mortgage is only possible if there is a long-term loan component, as with a combined bridging loan or buy-and-sell loan. With a standard bridging loan (simple cash advance), renovation costs cannot be included.
The property value advance loan (PAM): A little-known tool for energy renovation
The property value advance loan is a powerful mortgage-backed financial alternative that allows you to finance energy renovation works without increasing monthly expenses.
- Operation: The bank lends you the amount you need for the work (insulation, heating, global renovation). Unlike a traditional loan, you don't repay the principal every month. The refund is done in fine, that is to say all at once, at the time of the sale of the property. Only interest can be paid monthly (or capitalized in some cases).
- Advantage: Your monthly cash flow is maintained. It is the ideal tool to value your property (by improving its DPE) before reselling, without exiting cash immediately.
- Disadvantage: The overall cost is higher than a traditional loan because the interest accrues over the entire life of ownership without the capital falling. In addition, a mortgage guarantee is mandatory.
NOTE
Since 2024, the property value advance loan is no longer subject to income conditions.
MaPrimeRénov' and 2026 grants in the financing plan
In 2026, the MaPrimeRénov' system favors “large-scale renovation”, accessible to all income levels and up to €32,000.
- Operation: The system finances part of the work allowing a gain in at least two energy classes (e.g.: going from F to C). The amount of assistance is calculated as a percentage of the amount of work (excluding taxes), capped according to your income.
- Advantage: These grants reduce the net cost of your project. They can be considered by the bank as a “deferred contribution”, sometimes making it easier to obtain the main credit.
- Disadvantage: The payment of the bonus takes place thereafter the end of the work and the payment of invoices. You must therefore advance the cash flow (via a bridge loan or savings) while waiting for the reimbursement of the State.
