We are seeing an increase in demand for Bridging Finance in Portugal. Subject to profile, if a client is looking for short term finance because they intend to sell their existing property in Portugal (but haven’t yet found a buyer) and buy a new one, we can arrange this type of finance. A mortgage will be placed on both the new property and existing one (short term finance).
Bridging Finance Case Study
A client wishes to buy a new property valued at €500,000 with a 30-year mortgage of €440,000. They haven’t yet found a buyer for their existing property which is valued at €200,000 and has an outstanding mortgage of €50,000. This is a 88% LTV, falling to 68% after the existing property sells.
In total, the client needs to borrow €490,000 (€440,000 + €50,000). Since the sale of the existing property will release €150,000, only €340,000 of this needs to be financed over the long term and €150,000 can be borrowed as bridging finance until the existing property is sold.
The mortgages deals are:
€340,000 mixed rate long-term mortgage: 10 years fixed rate 1.9% then 20 years variable rate of 6-month Euribor + 1.09%
€150,000 fixed rate short-term loan: 30 years at 1.75%
No life insurance is required.
While the existing property remains unsold the monthly repayments are:
Long-term mortgage: €1,240 (30-year term at 10 years fixed rate)
Short-term loan: Interest only + 10% of capital repayment of the short-term mortgage: € 249.38 (30 years fixed rate)
On the sale of the existing mortgage, the short-term loan is paid off and the client continues to pay €1,240 until the end of the 10 years fixed rate.
It must be remembered that the buying costs will include mortgage fees for both loans, and both properties must be insured while under ownership.