Understanding the Three Types of Bridging Loans: Dry, Associated, and Integrated

In principle, the bridging loan is a short-term bank loan allowing you to create a financial link between a property that you sell and a new property that you buy.

As soon as the first property is sold, it is possible to repay all or part of your bridging loan and/or take out a real estate loan. In fact, there are three forms of bridging loans, each of which can correspond to a given situation or strategy of the borrower.

The “dry” bridging loan

The first is called “dry”. Here, the bank simply grants you a loan to buy your new property; loan that you will then repay through the sale of your previous property.

It is therefore, in reality, a cash advance. This type of bridging loan is generally aimed at people who have already repaid their previous mortgage and who are purchasing a property whose value is lower than that of the property sold.

Main advantage: the monthly payments to be paid during the loan period are low since you only repay the interest.

The “associated” bridging loan

Most of the time, when we want to acquire a new property it is to expand and therefore buy more expensively. What’s more, you may not have finished repaying your first mortgage loan.

In this case, the bank offers to combine the bridging loan with a new real estate loan. As long as the sale of the previous property has not taken place, you pay the interest on the bridging loan as well as the first monthly payments on the new property loan.

Once your old home is sold, you repay the bridging loan in full and continue repaying the property loan. While waiting for the sale, the monthly payments can therefore be quite high, it is better to prepare for this.

The “integrated” bridging loan

Unlike the “associated” loan, this involves taking out a single loan covering both the bridging loan and the real estate loan. It is therefore much higher and is expected in the long term, assuming that debt remains sustainable.

Its advantage lies in the fact that you can use the proceeds from the sale of the previous property as you wish: for example, to carry out work in your new home.

You can also decide to reserve all or part of it in order to repay your credit. In this case, make sure that a clause provides for the absence of penalties for early repayment. Finally, this type of loan also gives you more time to sell your old home.