Upgraders face the most complex challenge in the market: buying a new apartment while their money is "stuck" in the current one. Timing is everything.
Three problems to solve
- Cash flow – the seller of the new apartment wants money before the buyer of your old apartment pays you.
- Financing ratio – how much the bank will finance on the new apartment. Financing limits
- Purchase tax – whether you will pay as on a single apartment or as on an additional one. Purchase tax
Financing for a replacement apartment
Those who commit to selling their current apartment within the period set in the directives are treated as buyers of a replacement apartment, and can receive financing of up to 70%. Those who do not sell are treated as buyers of an additional apartment: up to 50%.
A bridge loan
A short-term loan (usually one to two years) that bridges the gap until the money from the sale arrives. Sometimes you pay only interest on it, and repay the principal from the sale proceeds. The risk: the sale is delayed or happens at a lower price than planned.
Purchase tax for upgraders
When you sell the previous apartment within the period set by law, you can benefit from the single-apartment brackets. In practice you initially pay according to the additional-apartment brackets and receive a refund after the sale, or receive the benefit up front under certain conditions. Check the exact dates for your deal with your lawyer.
The right order
- A realistic valuation of your current apartment.
- A financing check for the new apartment, including bridging.
- Coordinating the payment schedules in both contracts.
- A safety margin in case the sale is delayed.
More: all the costs of buying, any-purpose mortgage.