You have finally found your dream home. A detached house or a flat where you can see yourself living for many years. But your current home has not been sold yet. It feels like trying to stand in two boats at once. What do you do?
Interim financing (mellemfinansiering) helps you move forward so you do not lose your new home. It is a temporary loan that covers the period from when you have to pay for the new home until the money from selling the old one has been paid out.
Here you get a simple run-through of how it works in practice, what it costs along the way, what the bank requires, which risks you need to know about, and realistic alternatives to interim financing.
Make yourself comfortable and get on top of the details, so your move is much easier.
What interim financing is and how it works in practice
Interim financing for a home purchase is a temporary loan that covers the period until the money from selling your old home has been paid out. The bank can take security in the home you are selling, the new home or both. The choice depends on your home equity and the bank’s risk assessment.
Among other things, the loan can cover the down payment and other cash needs until the sale of your current home goes through. The general rule from Finanstilsynet (the Danish Financial Supervisory Authority) that you pay at least 5% of the purchase price yourself can be set aside with interim financing. If, for example, you need 150.000 kr. for the down payment on a new home, interim financing can cover it temporarily.
Once the sale of your old home is complete and the deed is in place, you use the net proceeds to repay the interim financing in full or in part. That is why many people call it a bridging loan.
To protect itself, the bank takes a charge on your current home. Sometimes the bank also takes a charge on the new home for the period.
The interest rate is usually variable and follows the bank’s rates for short-term credit, so it can move with the market.
Some banks only want ongoing interest payments, while others also want small repayments along the way. This is fixed in the agreement when the loan is set up.
To get an offer, you will normally need to show the purchase agreement for the new home and documentation for the sale of your current one, such as an agency agreement or a sales valuation.
The term varies. For some, it is all wrapped up within a few weeks in a fast market, while in other cases it lasts several months, depending on handover dates and the pace of the sale.
When you typically need interim financing
You may have a signed purchase agreement for a new home while the sale of your old one is still lagging behind. Perhaps you want to secure a house quickly, even though the buyer for your current home is not quite in place yet. Interim financing keeps the deal moving and gives you peace of mind while everything falls into place.
The handover of the new home can be a long way off, often months away. The sale of your old home only becomes final once the buyer’s withdrawal period has expired and all reservations, such as the lawyer’s reservation and the financing reservation, have lapsed. That gap calls for a temporary solution that covers the costs in the meantime.
The money from a home sale is only released once the deed has been registered without any remarks and your old loans have been paid off and deleted from the land register. That can happen on the handover date at the earliest, and often only afterwards, so you risk a period when you are short of money. Interim financing closes the gap until the paperwork is done.
If you want to renovate the new home before moving in, it makes sense to keep the old one a little longer. You avoid moving in amid building work and tight schedules. That requires cash for two properties at once, and this is where interim financing comes in handy.
The pace of the market matters too. If homes stay on the market for a long time, the risk of needing a temporary loan goes up. If it drags on for several months, interim financing helps you avoid getting locked in financially.
Property chains make the timing more fragile. When several purchases and sales are linked, small delays can easily push back payments. Interim financing makes you less dependent on your own sale falling into place on time.
Many people are short of cash precisely when the down payment and costs land at the same time. If your savings are not big enough to cover both the down payment and the fees for buying and selling, the bridging loan covers the gap until the money from the sale has been paid out.
Fixed costs such as property tax and insurance must be paid on both homes for as long as you own both of them. Interim financing can help you through the period until the old home is sold.
How the bank sets up a bridging loan
When you apply for a bridging loan for a home purchase, the bank starts by going through your finances with a fine-tooth comb. They review your income, debt and your disposable income (rådighedsbeløb) after fixed costs. This is the credit assessment. The bank wants to make sure you can pay the interest and any repayments during the period of interim financing.
To decide how much you can borrow temporarily, the bank needs to know the value of your current home. They often use a sales valuation from an estate agent or look at what similar homes in the area have sold for, so they can calculate the expected net proceeds from the sale, that is, the money you expect to receive.
The financing is split between several loans. The mortgage loan (realkreditlån) normally covers the bulk of it, and the bank loan takes care of any extra needs. The bridging loan only covers the short period until the money from selling the old home has been paid out. This split helps the bank keep an eye on the loan-to-value ratio and limit risk.
The security matters a great deal. The bank takes a charge on your old home, and sometimes on the new one too. The ranking of the charges is clearly agreed, so it is clear who gets paid first in the event of a sale or a forced sale. That plan makes things easier for both parties when it is time to complete the deal.
The bank’s plan for when the money is released follows the milestones of the deal. Typically, you have to deposit the down payment once the purchase agreement has been signed, and the rest of the purchase price on the handover date. The bank plans the release so the money is ready for those two dates.
Interest is calculated daily or monthly at a variable rate that the bank sets for short-term credit. Fees come on top, such as set-up costs and land registration fees. The bank explains the terms clearly before you sign.
A clear exit plan is essential. If the sale price turns out lower than expected or the sale drags on, you and the bank should have agreed in advance how the arrangement will be adjusted, so you avoid any big surprises.
Ongoing communication keeps the process running smoothly. The bank wants to hear about offers on your home and changes to handover dates, so the period of double financing is kept as short as possible and you avoid unnecessary months with two home loans.
What interim financing costs
The price of interim financing is not one fixed rate. Your interest cost depends on how much of the credit you use and for how long. Interest is calculated daily or monthly, so the longer you have the loan, the more you pay in total.
There is usually an arrangement fee on top. It is the up-front cost of setting up the agreement and of the bank’s review of your finances.
Registration of title (tinglysning) costs money too. When the bank takes a charge on the home or increases an existing charge, the state charges a fee for registering the security. This can apply to both the home you are selling and the new one.
The mortgage side affects the sums as well. If the deal requires remortgaging or a new mortgage loan, the bond price spread (kursskæring) and transaction costs can add extra expense to the financing, even though they are not part of the bridging loan itself.
Some banks require a valuation from an external valuer. That bill comes on top of the loan costs. A sales valuation from Brikk is free and comes with no obligation.
There may be ongoing fees during the period, such as administration fees or credit commission. Small amounts, but they add up.
Insurance also squeezes your cash during the overlap. Fire insurance must be in place at handover, and many people also take out change-of-ownership insurance. This increases the total costs.
If the sale drags on, the bill goes up. Extension fees and extra interest can hit your budget. Have a clear exit plan from the start to reduce the risk.
Requirements for interim financing: sales valuation, disposable income and documentation
A sales valuation from an estate agent is often required when you apply for interim financing. The bank wants an up-to-date valuation with a realistic price and expected time on the market. They use the valuation to gauge the risk. A price that is too high or an unusually long time on the market sets alarm bells ringing.
Disposable income carries a lot of weight. It is the amount you have left each month after fixed costs such as loans, insurance and tax. The bank wants to see that you can carry the costs of both your old and your new home during the period of double payments. They look for a minimum level to avoid finances that are too tight, especially if the sale drags on.
The loan-to-value ratio also gets attention. Once the sale of the old home has gone through, your total debt must not exceed the normal limits for home financing. The bank therefore monitors the ratio of debt to property value across your homes, so there are not two large loans without solid security.
To get an overview, the bank asks for documentation such as payslips, your annual tax statement from Skattestyrelsen (the Danish Tax Agency), a statement of your debts and the purchase agreement for the new home. This provides the basis for a credit assessment and reduces the risk of unpleasant surprises.
Some banks carry out stress tests. They run the figures with a lower sale price or a higher interest rate to see whether your finances still add up under pressure. The aim is to establish how much strain your budget can take before the decision is made.
There may also be a requirement for a Plan B. This could be the option of making extra repayments, additional security such as a charge on another property, or an agreement to adjust the sale price if the market shifts significantly.
The interim financing itself comes with a time limit. Typically a few months. The bank wants updates along the way on offers, progress and the sales plan, so the period of double financing does not drag on too long.
Rules and practice vary between banks. The points here are general. Always check the specific requirements with your own bank.
The risks of temporarily owning two homes
Two homes at once take a toll on your finances. Interest, repayments, property taxes, insurance and common charges all run at the same time. The budget gets tight, and other spending often has to give way. Some months feel tough, because more money has to be found than usual.
Uncertainty about the sale price makes it worse. The bank bases its figures on a valuation, but the market can go another way. If the home sells for less than expected, you end up with residual debt or need an extra loan to close the gap. That hits your finances and adds a heavy layer of worry on top.
The pace of the market has a big effect on time on the market. A sale can drag on for months if buyers pull out or activity slows. Every extra day costs interest on the interim financing, and the total costs grow quickly.
The interest rate on bridging loans often follows variable, short-term rates. If rates rise along the way, the arrangement becomes more expensive than expected. When your budget is already stretched, unforeseen extra costs hurt.
Registration and remortgaging fees for changes to charges or mortgage loans are another expense. You won’t get them back when you sell later on. Each is a small amount on its own, but they add up and hit a budget that is already stretched.
Property chains increase the risk. If one sale falls through because a party lacks financing or pulls out, you are left having to find a new buyer quickly. Being under pressure leaves you in a weak negotiating position and can easily lead to hasty decisions.
Cash gets even tighter when extra bills turn up. Perhaps the old home needs doing up before the sale, or moving costs turn out higher than expected. That hits hard in the months when the costs of two homes are already weighing heavily.
Finally, the mental strain takes its toll. Owning two homes at once and waiting for a sale drains your energy and focus. Fear of losses or of making the wrong choices makes negotiating with both buyers and the bank harder, and costs both time and money.
Selling first or buying first: pros and cons
Sell first, and you know exactly how much money you have to buy with. That clarity takes the guesswork out of financing and keeps you clear of double loans and interest. Financial peace of mind helps a great deal during a stressful period. The downside is obvious: your dream home may be hard to find. You may then end up in temporary accommodation or having to move twice, which costs both time and money and adds extra hassle to everyday life.
Buying before you sell makes for a calmer move. With two sets of keys, you can renovate at your own pace and plan without rushing. The transition becomes far less chaotic, and the practical steps can be timed more precisely. The flip side is the cost: two homes at once means loans, property tax and insurance on both, often with interim financing on top. That pushes up the total costs considerably.
The market also has a bearing on the choice. When homes are selling quickly, buying first is more realistic, because the wait for your own home to sell is usually short. When time on the market is long, selling first is the financially safer option, so you are not stuck with double costs for a long time.
Your negotiating position shifts with the order you choose. As a buyer with no subject-to-sale condition, you are in a stronger position with the seller of the new home. As a seller with your own sale already agreed, you have the edge when you make an offer on your next home.
The timing of the handover dates can reduce the need for a bridging loan when you buy before you sell. If the handover dates for the purchase and the sale are close together, the overlap can be shortened or double payments removed altogether.
The choice also affects your everyday stress levels. Buying first gives you flexibility but squeezes your budget. Selling first strengthens your finances but takes patience, especially if you need temporary accommodation.
Conditional purchase agreements and other realistic alternatives
See interim financing as one tool, not the only way forward. There are several options that often carry less risk and give you more peace of mind. A conditional purchase agreement, subject to the sale of your current home by a fixed deadline, can reduce the need for expensive interim financing. Your offer will look weaker to the seller, though, so you have to weigh negotiating strength against security.
A later handover date on the new home gives you breathing space to sell first, without stress and double costs. A short-term rental if you sell first, or temporarily letting out your old home if you buy first, can fit in when the timing is off. That gives you flexibility without major financial shocks.
Savings or private loans from family can bridge the gap for a while. Put clear, written agreements in place so the terms and repayment leave no room for doubt. Selling some of your securities frees up cash quickly, but be aware of tax and the risk of capital losses.
Think strategically, too. Set a realistic asking price based on estate agent data to encourage a quick sale and shorten the period of double payments. Write precise deadlines and conditions into your offer, so you don’t end up stuck with two homes if the sale falls through.
The next step is to work out concrete figures with your bank or an independent adviser. Get calculations that allow for a 1-3 month delay or a lower sale price than expected. That gives you a clear picture of what actually suits your finances.
At its heart, it is about striking a balance between security and flexibility, the pace of the market and your financial situation. Early, thorough advice makes the choice easier. Talk to the experts in good time and get the figures straight before you commit.
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