Construction financing / bridge financing

Hello,

For a 15-year-old owner-occupied home of mine, there is still an outstanding loan balance of currently 35,000 EUR (first-ranking land charge entry in the amount of 50,000 TEUR). The existing loan agreement ends at the end of 2016.

Now I plan to sell this house and begin construction of a new, smaller single-family house at the beginning of 2014. The plot of land is already available. According to a real estate agent and a construction engineer, from the current perspective, the sales proceeds from the old house are expected to be sufficient to cover both the existing loan including any possible prepayment penalty upon repayment, as well as the costs for building the new house. What options are there to finance the construction of the new house, sell the old house only after completion/move, and use the money to repay the remaining loan debts of the old house as well as any interim financing of the new house?

Who has solved a similar situation or can give tips?

Best regards

Hello gunterh,
we have the same problem. The bank solves it by providing bridge financing for the sales proceeds. As collateral, a land charge is registered on the new property and additionally, the bank has the rights from the purchase contract for the old house, which is yet to be concluded, assigned to it (= additional proceeds after repayment of the old bank).
This problem occurs for many builders who already own a property but want to build a new (larger/better?) property.
Just talk to the bank that will finance the new house (or go to, for example, Interhyp or similar). Many have had good experiences with Interhyp.

Best regards
Nordanne

We sold our house first and postponed the handover date by a long time (10 months). As compensation, it makes sense to pay rent to the new owner or to cover the loan interest for their double burden (if the money has been transferred to your account) instead of paying rent. Many banks offer a property change, which means you do not have to pay early repayment fees, and the land register entry is simply transferred from the old property to the new one.

We sold our house first and postponed the handover date by a long time (10 months). As a compromise, it makes sense to pay rent to the new owner or cover the loan interest for their double burden (if the money has gone into your account) instead of paying rent.

A friend of mine also went down this path; if the buyer agrees, it is the most sensible option of all.

"Just quickly creating a mortgage" also costs every time "just quickly" a notary, mortgage registration, etc. That’s a few thousand euros as well... For that money, you can already cover a large part of the construction phase "rent" or "interest".