You can't always avoid interim financing – Here's why
When your money keeps you waiting
Sometimes you can't avoid interim financing
Interim financing is a short-term bullet loan. There are some clear pros of interim financing: there's no repayment, it's very short-term, and you can cancel it quarterly. The downside is that it's often more expensive than a standard annuity loan. Nevertheless, there are times when you simply can't buy property without it.
Interim financing is always the way to go when you need to bridge a short period, i.e., when your capital is paid out a little later than you need it. The interim financing replaces your equity capital at that moment.
As with any other financing, interim financing is a loan where you pay interest to the bank. The difference is that the term is limited to a maximum of 24 months. Also, the interest rate is usually higher than the current market rate. But this way, the bank protects itself from any risks.
The good news is that we can also provide interim financing and track down the best offer for your project. Just drop us a line at financing@urbyo.com. Or exchange ideas in the Urbyo Community with other owners who already have experience with interim financing.
When you need interim financing for your property
For example, interim financing comes into play when you want to buy a new property and sell your old property to finance it. In most cases, the purchase price of the new property is due earlier than that of the property you're selling. That means you'll receive the money from the sale after paying for the new property. In this case, you simply agree with the bank on interim financing with the assignment of the deed.
Perhaps you also have a gift, life insurance, or pension insurance up your sleeve and thus have money that will be available to you soon. If you're about to take out follow-up financing, interim financing is also a possibility.
If you bought a property and want to use a building savings contract to finance the construction of a house, interim financing can really come in handy. If you don't have access to the building savings contract yet, you can apply for a so-called interim construction financing loan. It allows you to finance the construction costs depending on the progress of the construction work. When you receive the money from your building savings contract, you can use it to repay the loan.
How interim financing works
As you probably guessed, the requirements for interim financing vary significantly from bank to bank. But no need to spend endless hours running from one bank to another: We'll happily collect offers for you. Just let us know if you need us.
The be-all-end-all for interim financing is your creditworthiness, which needs to be reevaluated for this specific purpose. If everything checks out, you're good to go.
Of course, the bank will also know all about the financial means that you'll soon have access to, but there's always the chance that something will go wrong. The bank may want a real estate charge or lien entered in the land register as security for the interim financing loan. But that's no big deal. This entry will be deleted as soon as you have repaid the loan.
By the way, you can pay the loan back at any time. So, as soon as you have the money available, you can repay the loan straight away, and you don't have to pay an early repayment penalty.
How much interim financing costs
The interest rate for the interim financing of a property is always based on EURIBOR — the interest rate for time deposits in euros — and the bank's surcharges for processing and managing the loan. You can expect an interest rate of up to 3% higher than the current market rate — relatively high for the short term (max. 24 months) compared to an annuity loan.
Tip
If you have already signed a purchase or preliminary contract for the sale of real estate, don't keep it to yourself. When the bank sees that a new buyer with appropriate construction financing has been found, they'll know you're likely to be able to repay the interim financing they give you. And that will earn you more points in terms of the conditions they offer you, resulting in a better interest rate.
