Bridging loan calculator
Work out what a bridging loan costs. Enter the property value, the loan, the monthly rate and the term, choose retained, rolled or serviced interest, and the calculator returns the loan to value, the monthly interest, the fees, the net advance and the total to repay.
What is a bridging loan calculator?
A bridging loan calculator is a tool that estimates what a short-term bridging loan costs. It takes the property value, the loan, the monthly interest rate, the term and the fees, and returns the loan to value, the monthly interest, the total interest, the net advance and the total to repay. It lets a developer or investor test a bridge before approaching a lender, so the numbers are clear before the conversation starts.
What is a bridging loan?
A bridging loan is a short-term loan secured against property. It is used to move quickly, to buy a site at auction, to complete a purchase before longer-term development finance is in place, to release equity against an asset, or to repay a development facility at practical completion while a scheme lets up. It is interest-first finance: the loan is sized against the property value rather than an income, and it is repaid in full from a defined exit, a sale or a refinance, rather than amortised over years.
How much does a bridging loan cost?
The cost of a bridging loan is the interest plus the fees. Interest is charged monthly, indicatively from around 0.75 to 1.10 percent a month for a development or investment bridge, and can be retained, rolled up or serviced. The main fees are the arrangement fee, usually around 2 percent of the loan, a valuation fee, legal fees for both sides, and a broker fee where a broker arranges the loan. There may be an exit fee on some products. The calculator adds the interest and the fees into a total cost of finance.
| Cost | Indicative level |
|---|---|
| Monthly interest | 0.75 to 1.10% a month |
| Arrangement fee | Around 2% of the loan |
| Valuation fee | Scales with property value |
| Legal fees | Borrower pays both sides |
| Broker fee | Where a broker arranges the loan |
Retained, rolled or serviced interest
There are three ways to handle the interest, and the calculator covers all three. Retained interest is deducted from the advance on day one, so you draw less but make no monthly payments and repay only the loan at exit. Rolled up interest is added to the balance each month and settled when the loan is repaid, again with no monthly payments. Serviced interest is paid monthly from cash flow, so the day-one advance is higher but you carry a monthly cost. Most development and site bridges use retained or rolled interest, because the site is not producing income during the works.
How much can I borrow on a bridging loan?
How much you can borrow is set by the loan to value, the loan as a percentage of the property or site value. Bridging is indicatively available up to around 70 to 75 percent of value on a standard case, higher with additional security or a second charge. Where the bridge funds a residential development scheme, it gives way to development finance once consent and a build contract are in place, which our residential development bridging finance page covers, and the difference between the two is set out in our guide to bridging finance versus development finance.
Types of bridging loan
A bridging loan comes in a few forms, and the type changes the rate and the lenders that will look at it. An open bridging loan has no fixed repayment date, used when the exit is likely but not yet dated; a closed bridging loan has a fixed exit, such as an agreed sale completion, and is usually cheaper. A first charge bridging loan sits ahead of any other lending on the property; a second charge bridging loan sits behind an existing loan and costs more for the extra risk. Most development and site bridging loans are unregulated commercial loans, because they are taken by a company against an investment or development asset; a regulated bridging loan, secured on a home the borrower lives in, sits inside the FCA perimeter and is referred to an authorised firm. The calculator works for any of these, you simply set the rate, the loan to value and the term to match the bridge you are pricing.
What bridging lenders look for
Bridging lenders are a specialist market: challenger banks, debt funds and private lenders that price short-term, asset-backed loans on speed and security rather than income. A lender will look at the property as security, the loan to value, your experience, and above all the exit, the event that repays the loan. The interest rate a case attracts reflects the loan to value, the asset, the charge position and how clean the exit is. We are an arranger and introducer across the bridging lenders that back development and investment cases, so we place the loan with the lender most likely to price it keenly rather than approaching a single name. A regulated bridging loan, for example one secured on a borrower's own home, is referred to an authorised firm.
Your exit strategy
The exit strategy is the single most important part of a bridging loan, because the loan is interest-first and repaid in one event rather than amortised. The two common exits are a sale of the property or a refinance onto longer-term debt, such as a development facility, a buy to let mortgage or investment term debt on a stabilised build to rent scheme. A credible, evidenced exit is what gets a bridge approved and priced well; a weak or uncertain exit is what makes a bridge expensive or unfundable. We frame and stress-test the exit before we place the loan, so the bridge does not outrun the plan to repay it.
Bridging loan calculator: common questions
How much does a bridging loan cost?
A bridging loan costs the monthly interest plus the fees. Interest is charged monthly, indicatively from around 0.75 to 1.10 percent a month for a development or investment bridge, so on a 500,000 pound loan at 0.85 percent that is about 4,250 pounds a month. On top sit an arrangement fee, usually around 2 percent of the loan, a valuation fee, legal fees for both sides and, where a broker arranges the loan, a broker fee. The calculator adds these up for you.
How much is a 200k bridging loan?
On a 200,000 pound bridging loan at an indicative 0.85 percent a month, the interest is about 1,700 pounds a month, or about 20,400 pounds over twelve months if the interest is rolled up or retained. A 2 percent arrangement fee adds 4,000 pounds, plus valuation and legal costs. Enter 200,000 pounds in the calculator to see the net advance and the total to repay for retained, rolled or serviced interest.
What are the monthly repayments on a bridging loan?
It depends on how the interest is handled. On serviced interest you pay the monthly interest each month, indicatively the loan times the monthly rate, and repay the loan at the end. On retained or rolled interest there are no monthly payments: the interest is taken upfront from the advance or added to the balance and settled when the loan is repaid. The calculator shows the monthly cost for each option.
What are the downsides of a bridging loan?
A bridging loan is more expensive than a term mortgage or development facility because it is short-term and fast, and it needs a clear, credible exit, the sale or the refinance that repays it. If the exit slips, extension or default interest can be costly. It suits a defined short-term need, such as buying a site at auction or completing before development finance is in place, rather than long-term funding. We frame the exit before we place the loan.
Is this bridging loan calculator an offer of finance?
No. It is an indicative tool. The rate, the fees and the loan to value a given case attracts depend on the property, the exit and the borrower. We are an arranger and introducer, not a lender. A regulated bridging loan, for example one secured on a borrower's own home, is referred to an authorised firm. Send us the case and we will come back with a view within one working day.
Need a bridge priced properly?
Send us the property, the loan and the exit and we will come back with a view on fundability and likely terms within one working day.