A Bridging Loan Calculator is a calculator used to work out the costs that are involved when taking out a loan by using Bridging Loan Calculators, people often search for this term to see just exactly what the costs are, including interest rates and other associated fees that will be added to the loan, a bridging loan is a type of short term financial product that is provided by a financial institution such as a bank or regulated authorised lender, before the crash of 2007 bridging loans were only really available from your local high street bank and even they did not really like to get too involved with them as they were considered as risky lending at this time the main reasons for taking out a bridging loan was to buy a house before you had actually completed a sale on your own, or if a property chain of buyers and sellers had fallen apart through either one of the buyers or vendors pulling out of the deal at the last minute causing the chain to collapse in which no seller or buyer could proceed, the Bridging Loan would then be put into place to allow the transactions to complete, whoever had taken out the bridging loan would then repay it from the sale proceeds of the property they were selling.
Bridging Loan Calculator For Rates & Costs
Bridging Loan Calculators
We have set out below an example of how a Bridging Loan Calculator works itemising costs and rates.
For this example, we will assume a bridging loan of £150,000 over a period of 6 months. With an Interest rate of 4% Pm note, all bridging interest is quoted monthly rather than as an annual rate.
So £150,000 x 4% is equal to £600 per month of interest due now if you had the loan outstanding for 6 months you would pay a total interest amount of £3,600 for the loan.
In addition to this, you will need to calculate in the lender's arrangement fees which will be a minimum of 1% and are usually 2% of the loan amount at 1% it would be £1,500 based on the above loan.
So the total costs are £5,100 for six months loan this is using 1% as an arrangement fee if it was 2% it is £6,600
Note if the same loan was taken out for a year the costs would be £8,700 or £10,200 with the higher arrangement fee of 2%.
Other costs to consider are legal fees and valuation, we have given details on these below.
Valuation Fee Bridging Loan Calculators
When you take out a bridging loan the lenders will insist that a valuation is carried out on the property that you offer as a security this is to ensure that the loan to value that they are offering is in line with the value of the property, the valuation can take to forms one is called a desktop and what this basically means is that someone from the bank or lender will sit down and simply look through sold prices for the street or location of the property, obviously this is a fairly basic way of doing the valuation as it does not take into account the properties condition, however for smaller loan sizes say up to £200k this is the favored method as it is quick and cheap, for larger loans a lender would in most cases instruct a formal valuation this would involve a visit by a surveyor to look at the property and also do a more in-depth study of the resales etc. For the valuation fee, you should calculate a minimum of £200 and then around £150 for each £100,000 of the amount so if the loan was £300,000 in total a typical valuation fee would come in at £450, although you can agree and negotiate this with the valuer before making the appointment.
In all circumstances a lender will expect you to pay for their legal costs that are incurred as a result of your loan application, before you start the application process you will agree to an amount and that will have to paid to their legal team before they commence work, in a simple application this can be as little as three to five hundred pounds however for larger loan sizes and cases that are more complex it could be substantially more, whatever the amount always agree on it before starting work on the application, note as well as the lender's legal fees you will have to factor in the fees from your own instructed solicitors
Arrangement fees are normally 2% of the loan amount that you wish to borrow so on a £100,000 loan you can expect to pay an arrangement fee of £2,000 all lenders will charge you an arrangement fee and 2% seems to be the norm, fortunately, you will not have to pay this in advance as it is just taken from the loan Amount at the point at which you draw the bridging loan down.
Bridging Loan Uses
Bridging Loans are used for a short-term finance solution usually to bridge a gap between either selling or buying a property or to raise finance from an existing property that you already own.
Buy before selling.
This is the most common form of use for a bridging loan, often you will see a property that you want to buy before selling the one you already own, the problem with this is that an estate agent will not consider a bid unless your property already has an offer in place, or you can show them that you can proceed with the purchase without selling yours, this is a prime situation where bridging finance can be used, once you have an offer of finance then your offer on the new property can be put forward as the seller and their agent know that you can complete without selling first, so you would buy the property with a bridge and then put your property on the market once you have completed the sale of your property the proceeds can be used to redeem the bridging loan.
Buy at Auction.
Many bridging loans are used to buy at auction, the terms of the vast majority of auctions will give you at most 28 days from the auction date and your bid to make the completion, mortgages are not effective in this situation as they take far longer to complete, so auction buyers will arrange finance pre auction so that they are secure that if their bid is successful then they have the means to complete the purchase within the timescale as the bridge can be up to 12 months the property can then be re-sold to clear the bridging loan or a new mortgage arranged.
Release equity from a property.
Another use for a bridging loan is to release equity from a property, if you are unable to get a personal or bank loan then bridging finance can provide you with a short-term solution, as a bridging lender will offer funds for up to 18 months, you will have to show clearly how you intend to pay them back though as such you will need to place the property up for sale, or if you intend to pay the loan of from another source then you will need to show that this is feasible.
Our Bridging Loan Calculator can show you all of your expected costs and fees that will be payable, you can then determine if the costs outweigh the benefits to see if this is the right solution for your circumstances.
UK Bridging Loans are one of the UK’S leading bridging loan brokers and can search all of the loans on the market to source the perfect deal for your circumstances.
Contact us now to discuss your proposal and we can assure you of the very best advice and service, call us now 0800 138 6001 or use the contact form on this page to compare loans.
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