We speak of dry relay loan when it is not associated with a depreciable credit. It is then the only loan participating in the purchase of housing. Its duration is identical to a classic relay credit, ie two years maximum.
This situation arises especially when the estimated price of the old dwelling, possibly increased by the personal contribution is higher than the estimated price of the new property. It must be admitted that this situation is rare because most borrowers want to buy a larger home and therefore more expensive.
Rate of a dry relay loan and cost of credit
In general, the rates of dry relay loans are higher than those of the redeemable credits, the interest not running for a sufficient duration (sometimes only a few months) for the operation to be profitable for the bank.
As for the refund, it is done as for a credit in fine. That is, the borrower only pays the interest back to the bank.
Only when the property is sold will it repay the borrowed capital.
The cost of credit depends of course on the duration and therefore the date on which the property will actually be resold. The table below shows how much a bridge loan can cost the borrower money.
- Amount: € 150,000
- Rate: 4%
- Monthly payment excluding insurance: 500 €
|Date of completion of the sale||Amount of interest|
|2 months||1,000 €|
|6 months||€ 3,000|
|10 months||€ 5,000|
|18 months||9 000 €|
|2 years||€ 12,000|
As can be seen, if at the end of the two years, the property is not sold, the buyer will have paid € 12,000 in bridge credit interest to the bank.
Case of the total franchise
To avoid that the monthly installment of the bridge loan is added to that of the current loan on the old housing, some banks offer a total deductible interest. Let it be clear that they do not propose to cancel interest payments. They only propose to defer payment until the date of sale.
While this solution may prove useful in some cases, it only increases the cost of credit.
Calculation of the amount
There are two methods of calculation to determine the amount according to the bank to which one is addressed. Let’s take the example of a house whose price is estimated at 200,000 € and let the remaining capital be 50,000 €.
We will leave on a dry real estate leasing rate of 70%.
Applying a percentage of the balance to the borrower
The first method is to first calculate the amount that will be left to the borrower once the credit is repaid:
€ 200,000 – € 50,000 = € 150,000
In a second step, we apply the percentage, which gives:
€ 150,000 X 70% = € 105,000
Applying a percentage on the estimated price of housing
The second method is to directly apply the percentage on the price of housing for sale.
€ 200,000 X 70% = € 140,000
We then subtract the current loan, which gives:
€ 140,000 – € 50,000 = € 90,000
As can be seen in our example, the first method is more advantageous and allows to obtain a loan amount relay dry higher than 15 000 € to the second method.
Where to find a dry relay credit?
Negotiation will not pose any particular difficulties if you go to your own bank. On the other hand, if you want to play the competition, it will be more delicate. Indeed, banks need to offer real estate credit to win new customers over the long term.
The latter generally require the opening of a bank account and the domiciliation of income. However, a bridge loan is repaid upon resale of the property and the bank knows that in such a case, it will not have enough time to retain the borrower.