The ABC Finance Bridging Loan Calculator
Our simple to use bridging calculator is designed to quickly work out the likely costs of bridging loans. On top of the interest, the calculator will also allow quick calculations of fees and loan to value (LTV).
Understanding The Bridging Loan Calculator
The calculator is designed to calculate the costs associated with taking out a bridging loan. It covers the following charges:-
- Lender Arrangement Fee
- Lender Exit Fee
- Total Interest
- Gross Loan with interest paid monthly
- Gross Loan with interest rolled up
- Net loan to value
For details of the likely interest rates and fees, head over to our bridging loan rates and fees page.
Gross & Net Loan
The calculator refers to gross loan and net loan figures. Although this can seem confusing at first, it is actually quite simple.
The gross loan is the total amount borrowed including all fees, charges and rolled up interest.
The net loan is the amount that is actually released to you and does not include any fees, charges or interest.
When calculating how much money you will be able to use, use the net loan. When calculating how much money you will repay to the lender, use the gross loan.
Understanding Loan To Value & Maximum Loans
The maximum loan on a bridging finance application is generally worked out using the loan to value ratio. This works in much the same way as a residential mortgage.
Depending on your circumstances, the quality and location of the security property and the intended exit, maximum borrowing can vary.
Commercial bridging loans have different criteria than those against residential property and in general, will achieve a slightly lower loan to value (LTV).
Due to the different property types in the commercial property world, it is difficult to state reliable maximum for every situation. As a general guide, the absolute maximum loan would be 70% LTV.
This is lower than bridging finance against residential property where the maximum available LTV is 80%. Taking out an 80% bridging loan, however, is rare and would likely attract a higher interest rate than a loan taken at a lower LTV. On top of the increased rate, the criteria would be a lot stricter. Bridging loans taken at 75% LTV are far more common on residential property and would see a significant cost reduction compared to loans above this threshold.
The higher the loan to value, the more risk both the lender and yourself are taking. As you move toward maximising your loan, the risks associated with repaying the loan in full should be considered.
It is common to see 100% bridging loans advertised online and we receive a lot of questions about how these work. The reality is that there will always need to be additional security offered to counterbalance the risk. The additional security would come by way of a second (or more) property offered to bring the average LTV down to the kind of levels shown above.
Also, if you are buying a property undervalue, some lenders will lend 100% of the purchase price. An example of this is if a property has an open market value of say £200,000 and you buy it for £150,000, the lender may lend the full £150,000. The value would, of course, need to be confirmed by an impartial valuer arranged by the lender.
If you are considering using additional security to fund a purchase without putting down a deposit, but all of your properties have outstanding mortgages, the new bridging lender would take 2nd charge behind the main lender. This means the new loan becomes, in essence, a second mortgage on the additional property. Although this is common, taking 2nd charge will increase the risk for the lender and this may be reflected in slightly increased pricing.
For information on likely rates and fees read on below. Alternatively, for full details of the products available to you, get a quick quote by enquiring online or talking to one of our bridging loan experts. We will usually be able to provide you with full terms within one hour of your enquiry.
Interest is often ‘rolled-up’ or retained. This means that during the term of the loan, no monthly repayments are due. The interest is added to the loan by the lender and is repaid when the loan is repaid.
Retained interest can be appealing as the luxury of having no monthly interest payments is attractive and can ease cash flow. The key consideration is affordability – would making the repayments be affordable. If not, we recommend rolling up the interest where possible.
Where both rolled-up or serviced interest is comfortable, our expert bridging loan advisors will help you to understand the benefits of each route.
How Long Can I Borrow The Money For?
Bridging Finance is often referred to as a short-term product. Most loans are for between 1-12 months; however, there are lenders who will offer terms of up to 2 years.
Generally speaking, it would not be advised to take out bridging finance for 2 years due to the costs involved. It would be much better to move onto longer-term debt or sell the property before this point.
For some clients, a longer-term bridging loan will be suitable. For example, when resolving particularly complex title issues in the hope of significant capital gain.
Understanding the term you are likely to need upfront is very important, as going beyond this term will likely incur costs and may not even be possible. It is better to do your research upfront to ensure you don’t run into problems further down the line.
Getting A Personalised Quote
For free no obligation advice, use our quick enquiry form or call 0800 088 6008 to speak to one of our bridging finance experts. We usually provide the full figures to you in 1 hour.
View more information on available bridging loan products.