Find Out How Much Does it Costs to a Take Bridging Loan and How Much You Can Borrow

Bridging Loan

Find Out How Much You Can Borrow and Repay With the Help of Bridging Loan Quote Calculator

Find Out How Much a Bridging Loan Can Cost Using a Bridging Loan Calculator

Are you looking for a short-term financing option to purchase a property in the UK? Getting a bridging loan could be just right for you. But, you may ask how much can I borrow through bridging finance? Will the interest rates be something that I can afford? And are the additional expenses manageable? Using a bridging loan quotes calculator, you can get an approximate estimate of how much you can borrow with bridging finance, along with what interest rates and other charges will be.

What is a Bridging Loan Calculator?

A bridging loan calculator UK is a free tool that helps you determine the overall cost of the loan based on your specific requirements. It gives you indicative costs of the interest rates, lender fees, broker fees, valuation charges and other expenses associated with the bridging loan. But, you must keep in mind that these charges vary depending on the lender you choose as all lenders have their own lending criteria and fees.

This is a great tool to understand how much you will be able to borrow with a bridging loan and how much it will cost, whether you are looking to buy a new home before selling the existing one, or you are looking to raise funds for a development project.

How Bridging Loan Costs is Calculated

The total cost of a bridging loan is dependent on several variables. Every element of the loan is individually assessed when determining different fees associated with the loan.

Interest Rates

Interest rates are largely dependent on how much you wish to borrow and the value of your security. This ratio of the total borrowing amount to the total property value is referred to as the LTV ratio. The lower the LTV, the lower the rate of interest will be. The condition and location of the property also affect the interest rate. The more remote and poor the condition of the property, the more risk there is for a lender that you may not be able to repay the loan and the higher interest rate they will charge. Furthermore, larger loans spread over a longer duration will incur higher interest. The monthly bridging loan interest rates start from 0.5% and can go up to 1%.

Lender Fees

Bridging finance lenders usually charge an arrangement fee of 0.5% to 2% of the total loan amount. Some lenders may also charge a drawdown fee, which depends on the number of properties involved. Lenders may also charge a redemption fee when the loan is redeemed. This is the fee for removing a legal charge from the property, and it typically costs around £120.

Broker Fees

Some bridging loan applications require a specialist broker to go through the loan process. In that case, a broker fee will be incurred.

Survey Fees

Before granting the loan, the lender would also want to examine the condition and location of the property, and estimate its worth. This is carried out by a specialist surveyor and can cost a flat fee or a percentage of the total loan value.

Legal Expenses

As with any other mortgage, a bridging loan requires solicitors to complete the large charge paperwork. Both the lender and the borrower will have their own solicitors to represent the case. The borrower is usually required to pay the entire legal costs.

Loan Exit Fees

Some lenders may also charge an exit fee, which could be anything from 1% to 2%.

How Interest is Calculated and Added to the Loan?

Different bridging loan lenders have different ways of calculating and charging interest. Most lenders will offer one of three ways to charge interest.

Monthly Interest – Just like any other interest-only mortgage, you are required to pay the interest each month and they are not included in the loan amount. However, you must provide proof of income to ensure you are able to make monthly interest repayments.

Rolled-up Interest – In rolled-up, the interest is charged every month, but they are not paid each month. Rather, the interest amount is added to the outstanding account balance each month. As a result, your outstanding balance will increase every month.

Retained Interest – The lender retains the interest throughout the term of the loan. That means if you take a 12-month bridging loan, there will be no interest repayments until 12 months. The interest is paid as a single lump sum at the end of the term.

Bridging Loan Example

Let’s understand how the bridging loan cost is calculated with an example. Let’s suppose you want to buy a house that costs £400,000 before you can sell your existing property costing £350,000 with a £50,000 mortgage secured against it.

  • Net loan amount – £400,000
  • Monthly interest rate – 0.75%
  • Loan term (months) – 12
  • Total interest – £38,273
  • Arrangement fee (2%) – £8,000 (included in the loan)
  • Gross loan amount – £446,273

Now let’s take into account other expenses:

  • Valuation fee – £1,759
  • Lender admin fee – £145
  • Broker fee – £500
  • Lender legal costs – £2000
  • Telegraphic transfer fee – £35
  • Redemption fee – £40

The total loan cost will be £450,752.

How to Reduce the Cost of Bridging Finance

If you are buying a home before your existing home is sold, it is still possible to reduce the cost of a bridging loan London by using more than one property as security. Consequently, your LTV ratio will be lowered with two security properties, which will reduce the overall cost of your loan. If you currently have an outstanding mortgage on the property you are using as security, it will be included in the overall LTV calculation.

Furthermore, you can use a bridging loan broker to negotiate rates with the lender on your behalf. A broker will help you connect with multiple lenders who can offer favourable terms and the best interest rates based on your circumstances. In addition, the expertise of the broker can be helpful in minimizing the risk associated with your project.