A letter on whether there is a way to borrow a new home without having to sell the old one, because it is very difficult to coordinate the two to find a good buyer and a real estate that looks good. You do not want to take out a simple home loan for your new home because you would consider the monthly repayment to be too high for your current loan.
There is such a credit product, bridging, or home loan is called by banks
But before we look at how these products work, there are a few things to think about.
First, is it worthwhile to wait for a home to sell if you can only finance the new home by borrowing?
As you will see, mortgage loans have an interest rate of around 8%, which means that your commission will be $ 800-850,000 on interest and a few hundred thousand on the initial cost of a loan over a ten million year period. That is, it is better to sell your apartment for less now than to wait , unless you think you can sell the same ten million properties at least one million more in a year’s time. If you add that property prices have dropped another 6.4% last year, you can see that you are not at all better off waiting, and you have the chance that even house prices will fall during the wait.
Rather, give a ten million home five hundred thousand cheaper than wait a year for the dream buyer and pay one million for sure.
The other part of it is that a lot of people say they are moving to a bigger apartment, but they don’t want to sell their apartment at such a depressed price, so they would rather wait. I always remind them that not only is the price of their apartment, but also that of the apartment they would buy instead. I can wait another three years for a possible boom in the real estate market to give me a lot for my apartment, but then I’ll be buying another apartment so much more expensive, so I have nothing to gain from waiting.
How a Home Exchange Loan Works
The basic prerequisite is to have a loan on your current property, but that is logical, because if it is unencumbered, you can easily borrow another home (possibly offering the old one to cover the loan) and then sell it , you are repaying your existing loan.
Once you have the property you want to buy, you can take out this home exchange loan. The specialty of OTP is that you will not have to repay any interest or principal for 24 months (of course, you still have to pay interest, but you do not have to pay it!) And if you sell your old property during this time, you will not have to pay a prepayment fee.
If you sell the property in 24 months, you will calculate the interest and add it to the capital, you have to pay it.
If you fail to sell the apartment in two years, the outstanding interest (by that time it is well over one and a half million for a ten million loan, just to name a few) will also come into equity and the loan will function as a normal annuity loan. (What an annuity loan is, I wrote here about an annuity loan.)
This means that you have to pay off two loans immediately (old and new home loans), which can easily put a strain on your monthly budget. In such cases, real estate sales may become urgent at any cost. You may not want to wait.
Another problem you may have is the short interest period
With interest now on the floor, they can only go up from here. However, you will pay more if interest rates rise. Therefore, it is better to choose a longer-term interest rate than a 3-month mortgage rate. I wrote about it here: Time to fix interest rates.
Also worth considering is you not paying better on a 5-5.3% regular home loan and paying off the 1% closing cost than a 7.5-8.5% moving loan? (Ask your ex-colleague at Good Finance with these questions, he is up to date with current interest rates and terms.)
In summary, there is a great product that has been specifically designed to meet the needs of Imre, but it is worth exploring the issue, as you may be financially better off selling a low-priced property or choosing another credit product.