You usually finance a new home with a bridging loan, a temporary dual mortgage, or by selling your current home first with a financing contingency in your new purchase contract. A bridging loan bridges the period between purchase and sale, while a dual mortgage means you're temporarily financing two properties. The best choice depends on your financial situation and the likelihood of selling your current home.

What financing options do you have if you want to buy a new home?

Want to buy a house If you want to buy while your current home isn't sold yet, you have three main options: a bridging loan, a temporary dual mortgage, or buying a new home with a financing contingency. Each of these options has its own advantages and disadvantages, depending on your situation.

A bridging loan is a short-term loan that covers the period between purchasing your new home and selling your current one. This is useful if you want to act quickly on the housing market without waiting for the sale. The bank provides this loan based on the expected proceeds from the sale of your current home.

A dual mortgage means you temporarily have two full mortgages. This is only possible if you have sufficient income to cover both mortgages and the bank is willing to finance them. The advantage is that you have plenty of time to sell your old home without any pressure.

The third option is to buy your new home with a financing contingency in the contract. This protects you if the sale of your current home unexpectedly falls through or if you can't secure suitable financing. The downside is that in a tight market, sellers often prefer buyers without contingencies.

How does a bridging loan work when purchasing a new home?

Each bridging loan A temporary loan bridges the gap between buying your new home and selling your current one. The bank lends you money based on the expected proceeds from the sale of your current home, usually up to 70-80% of the appraised value.

You need a bridging loan if you need to pay for your new home before you receive the proceeds from your old one. The term is usually between 6 and 24 months, with the option to extend if your old home hasn't sold yet. During this period, you only pay interest on the bridging loan, not on the principal.

The cost of a bridging loan consists of interest and a closing fee. The interest rate is usually higher than with a regular mortgage, often between 4% and 6%. In addition, the bank often charges a closing fee of approximately 1% of the loan amount. This fee is the price for the flexibility to move before your old home is sold.

Banks do impose conditions on bridging loans. Your old home must be actively listed for sale with a real estate agent, and the asking price must be realistic according to the appraisal. You must also be able to demonstrate that you can temporarily bear the double housing costs. A practical example: if your old home is appraised at €400.000, you can count on a bridging loan of up to €320.000.

What are the risks of having two mortgages at the same time?

Two mortgages at the same time means that you double housing costs You'll need to pay for mortgage interest, any homeowners' association fees, insurance, and municipal taxes. This can easily add €2.000 to €4.000 per month, depending on the property. This puts a significant strain on your monthly budget.

The bank rigorously assesses your ability to cover these double expenses. They look at your income, fixed costs, and other financial obligations. You often have to demonstrate that you can pay these double expenses for at least six months without running into problems. This means you need a substantial financial buffer.

Your borrowing capacity is also affected by having two mortgages. The mortgage on your old home remains included in the calculation, meaning you can borrow less for your new home than if your old one had already been sold. This could mean you can't buy your dream home or that you have to wait until your old one is sold.

To mitigate these risks, you can take several steps. Ensure a realistic asking price for your old home to ensure it sells quickly. Build a financial buffer of at least six months' worth of double housing costs. Consider renting out your old home temporarily if it doesn't sell quickly; this will help with the monthly payments. And discuss with your mortgage advisor whether a bridging loan is more suitable than a full double mortgage.

When is a financing contingency sensible when purchasing a home?

Each financing reservation This is a clause in your purchase agreement that protects you if you fail to get a mortgage for your new home. It means you can withdraw from the purchase without penalty if the bank rejects your financing. This is wise if you're still unsure about your borrowing capacity or the sale of your current home.

You must include this contingency before signing the purchase agreement. Once you sign without a contingency, you are obligated to purchase even if you don't receive financing. The standard term for a financing contingency is four weeks, but in some cases, you can agree on six weeks if your situation is more complex.

Banks expect you to actively start working on your mortgage application as soon as you've signed the purchase agreement. You must request an official mortgage offer and submit all necessary documents within a few days. If you fail to do so, you may lose your right to invoke the financing contingency.

In a competitive housing market like Amsterdam, a financing contingency can reduce your chances of success. Sellers often prefer buyers without conditions because it offers more security. You can overcome this by arranging for a mortgage approval in principle beforehand, so you can offer with more certainty. Or by agreeing on a short contingency period of two weeks, which is more attractive to sellers than the standard four weeks.

How do you calculate how much you can borrow for a new home?

Your maximum borrowing capacity for a new home is determined by your gross annual income, your existing debts, and the loan-to-value ratio, which is a maximum of 100% of the property's value. As a rule of thumb, you can borrow approximately 4 to 5 times your gross annual salary, but this depends on your personal situation and current lending standards.

Your income is the most important factor. The bank considers your regular employment income, as well as any income from entrepreneurship. If you have two incomes, both are taken into account, which significantly increases your borrowing capacity. A higher income immediately means more borrowing capacity for your new home.

Your existing mortgage plays a significant role when buying a new home. If your old home hasn't yet been sold, the bank will deduct it from your maximum borrowing capacity. This capacity only becomes available after the sale. For example, if you have €250.000 of residual debt on your old home and can borrow a total of €500.000, you'll still have €250.000 available for your new home until the old one is sold.

Box 3 assets and other factors also influence your borrowing capacity. Savings and investments can increase your borrowing capacity because they demonstrate financial stability. On the other hand, student loans, revolving credit, and other loans reduce your maximum mortgage. Your age also plays a role, as the mortgage must be paid off before you retire.

You can take several steps to increase your borrowing capacity. First, pay off other debts like credit cards or personal loans. Increase your income by asking for a raise or taking on additional work. Consider buying together with a partner or family member to combine your incomes. And make sure you sell your old home quickly so the mortgage is no longer included in the calculation.

How Your Home Makelaars helps you finance your new home

We understand that financing a new home while your current one isn't sold yet can be complex. That's why we actively support you throughout the entire financing process, from the initial consultation to handing over the keys to your new home.

Our approach to financing issues includes:

• Strategic timing advice: We help you determine when the smartest time is to buy your new home in relation to the sale of your current home.
• Collaboration with mortgage advisors: We work closely with reliable mortgage advisors who specialize in bridging financing and complex situations
• Negotiation with financing contingency: We advise you on the strategic use of financing conditions and negotiate with sellers on your behalf
• Guidance in bridging situations: We coordinate with all parties involved to ensure that both purchasing and selling run smoothly.

As purchasing agent We ensure your financial position is presented optimally and that you offer only what's reasonable. We know the Amsterdam and Gooi markets inside and out and know exactly how to maximize your chances without unnecessary financial risk.

Do you want to know what the best financing strategy is for your situation? Contact us Contact us for a no-obligation consultation. We'd be happy to help you figure out the smartest way to finance your new home.