Bridging loan in Belgium: buying before you have sold

What is a bridging loan for?

You have found the home you want to buy, but your current home has not been sold. Yet you have to pay for the new one, sometimes before you have received the money from the sale. Notaire.be describes the bridging loan as a solution to a temporary lack of liquidity. It is also called a waiting loan, a linking loan or a gap loan (crédit d’attente, crédit de liaison, crédit de soudure).

Wikifin defines it as a loan used to finance a new home (purchase or construction) when the old one is not yet sold, and which is repaid from the sale of the old home.

How it works

• Short term. Notaire.be writes that it “can only be envisaged for a short period”, adapted to your needs, with a maximum of 12 months.
• Interest only. Wikifin: only interest is due during the loan, calculated on the full amount borrowed. “The capital only has to be repaid in full at the final maturity of the loan.” For these loans, the monthly payment therefore does not repay any capital.
• Fixed rate. According to notaire.be, you have a fixed interest rate for the whole term of the bridging loan. The page gives no figure: the rate is in the bank’s offer.
• Repayment. It is made from the proceeds of the sale of the old property.
• No penalty if you sell early. Notaire.be states that if your old home sells sooner than expected, you do not have to pay a reinvestment fee (indemnité de remploi) for early repayment. This penalty is otherwise about three months’ interest for a private mortgage loan. Check this clause in your offer, however.

The fees

Wikifin gives caps on arrangement fees:

• mortgage loan: maximum €350;
• bridging loan: maximum €300;
• bridging loan combined with a mortgage loan: maximum €650.

Arrangement fees are only due if you accept the offer, and they are not refundable if the loan does not go ahead. Valuation fees are a separate item: they must have been communicated to you and accepted in advance. Notary fees for the loan deed follow their own rules: see the guide on the notary, their fees and role.

Reminder: one-off costs are in principle not financed by the bank (Wikifin). Work them out with our tool to calculate your purchase costs. For a €300,000 property, the total purchase costs established by Payotte are €17,218 in Brussels, €13,718 in Wallonia and €10,618 in Flanders.

The risks

Notaire.be’s example illustrates the risk: a sale that takes longer than expected leaves the buyer without the funds to repay. Points to watch:

1. The sale may take longer than expected. The capital is due in a single payment at final maturity (Wikifin). You therefore need to have the amount at that time, and the maximum term stated is 12 months (notaire.be).
2. You pay two sets of costs at once. The interest on the bridging loan, calculated on the full amount borrowed, comes on top of your other repayments.
3. Repayment depends on the sale. Ask the bank what happens if maturity arrives before the sale.

Before signing, talk to your bank: for notaire.be, you should first go and see your banker, who will tell you whether a bridging loan “could be a solution”.

An alternative: transferring the mortgage

Notaire.be devotes an article to advice for a chain sale and purchase (mortgage transfer, bridging loan). A mortgage transfer lets you keep an existing mortgage instead of registering a new one: no 1% registration duty and no 0.30% mortgage duty, but notarial deed fees, which are lower than the combined cost of a release and a new registration. The page does not detail the full comparison with the bridging loan; ask your notary and your bank whether this option is possible in your case.

Sale agreement and timetable

The timetable of the sale and the purchase determines whether you need a bridging loan. Read the guide on the sale agreement (compromis) and ask the notary about the time limits for registration and signing of the deeds. Registration duties (droits d’enregistrement / registratiebelasting) must be paid within 4 months of signing the compromis (see registration duties).

Which professional to consult

Your banker or a mortgage credit broker tells you whether a bridging loan is possible and on what terms. The notary coordinates the sale and the purchase and explains the mortgage transfer to you. To estimate how much you can borrow in total, see your borrowing capacity and the guide on the mortgage credit broker.