Finance Calculator
Bridging Loan Calculator
Estimate the total cost of a bridging loan including monthly interest, arrangement fees, exit fees, and loan-to-value ratio.
Enter your bridging loan details
What is Bridging Loan?
A bridging loan is short-term secured finance used to bridge a gap between a purchase and longer-term funding or a sale. Commonly used in property transactions, bridging loans are typically arranged over 1 to 18 months.
How are bridging loan costs calculated?
Bridging loan costs are made up of monthly interest charges plus upfront and exit fees. Unlike term loans, bridging interest is quoted monthly and does not amortise - the full loan is repaid at the end of the term.
The formulas used are:
Monthly Interest = Loan Amount - Monthly Rate
Total Interest = Monthly Interest - Term
Arrangement Fee = Loan Amount - Arrangement %
Exit Fee = Loan Amount - Exit %
Total Cost = Total Interest + Arrangement Fee + Exit Fee
LTV = (Loan Amount / Property Value) - 100
Assumptions and caveats
- •Interest is assumed to be charged monthly and retained (rolled up) or serviced. This calculator models simple retained interest.
- •Valuation fees, legal costs, and broker fees are not included.
- •Some lenders add the arrangement fee to the loan, increasing the borrowed amount. This calculator treats it as a separate cost.
- •Actual rates and fees vary significantly between lenders and depend on the property, exit strategy, and borrower profile.
- •Results are indicative estimates only. Contact a specialist for a formal quotation.
Worked Example
Scenario
A property developer borrows GBP 400,000 as a bridging loan for 9 months at a monthly rate of 0.85%.
Calculation
- Monthly Interest = 400,000 x 0.85% = GBP 3,400
- Total Interest over 9 months = 3,400 x 9 = GBP 30,600
- Total Repayment = 400,000 + 30,600 = GBP 430,600
What This Means
The total cost of the bridging facility is GBP 30,600 over 9 months. Bridging loans are short-term instruments typically used for property transactions, auction purchases, or development projects where speed of funding is critical. The annualised cost of 10.2% is higher than traditional lending but reflects the speed and flexibility of the facility.
Frequently asked questions
A bridging loan is a short-term secured loan, typically lasting 1 to 24 months, used to 'bridge' a gap in financing. Common uses include purchasing property before selling an existing one, funding auction purchases, or covering short-term cash flow gaps in property development.
Bridging loan rates are typically quoted as a monthly percentage rather than an annual rate. For example, a rate of 0.75% per month equates to roughly 9% per annum. This monthly quoting convention reflects the short-term nature of bridging finance.
An exit fee (sometimes called a redemption fee) is charged when the bridging loan is repaid. It is usually calculated as a percentage of the loan amount, typically 1% to 2%. Not all lenders charge exit fees, but they should be factored into the total cost.
Bridging loan LTV (loan-to-value) typically ranges from 65% to 80% of the property value, depending on the lender, property type, and exit strategy. Some specialist lenders may offer higher LTVs with additional security or higher rates.
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