A bridging loan is a great option if you are looking to buy a house faster than a traditional mortgage. As mortgage brokers, we often get asked: How much can you borrow with such a loan? Are higher interest rates something you can afford to pay? Are the additional fees feasible for you?
Entering an online bridging loan calculator. It will give you rough estimates and help you decide if a bridging mortgage is worth your time.
A bridge loan can be obtained for any amount between £50,000 to £15,000,000. However, what a lender will offer you is dependent on the price of the property and how much you want to borrow.
Entering this information in a bridging loan calculator will allow you to quickly calculate your repayments, taking into account interest rates and other fees.
A calculator cannot factor in the reason for the loan. This can be buying a house at an auction or if you want to make an offer before any other bidder.
It’s worth asking a broker who specialises in this type of finance to supplement your bridging loan calculator. They will assess your situation and determine what a bridging loan would look like for you.
Constitute financial advice today, this will ensure you have the best deal on the market.
How does a bridging loan work?
A lender will calculate your bridging loans. They can also use any cost calculators to factor in the value of the property, the amount you are asking for, the length you would like to borrow and the deposit.
To give you an idea of the monthly repayments, total interest and final loan amount, the calculator adds the interest rate.
You should be aware that lenders may use more complicated calculators. These include your income, exit strategy, credit and debt history, and property development expertise (if you are redeveloping a home).
How interest rates are calculated
Bridging loans are more expensive than other mortgage products. They also have a higher interest rate and are charged monthly, rather than an annual rate. This is due to the faster turnaround time (typically under two weeks) and the fact that it’s intended as a temporary solution until more permanent financing comes in.
A typical monthly rate for a household would be between 0.39 and 1.5% at the time of writing.
A lender will look at your credit score and consider the viability of your exit strategy. Are you looking to refinance to a traditional mortgage or sell the property after it has been redeveloped? Or pay it off when another type of financing is available?
How extra fees and costs are calculated
Bridging finance is not only expensive because of the interest charged, but also because there are a variety of fees. First, lenders usually charge a small arrangement fee on top of the loan amount. This percentage is usually 2%, but it can vary depending upon the bank or building society from which you borrow. A lender might eliminate your loan altogether if you borrow a greater amount.
There are also valuation fees. A valuation of the property for which a bridging loan is being taken will be required by any lender. These prices will vary depending on the property’s value, its location and whether a desktop or site valuation is required.
Exit fees, solicitor fees, and broker fees are all possible fees. Our brokers offer a free initial consultation and then will provide a pricing plan.
Is the calculation of bridging loans different in Scotland?
Yes, bridging loans can be arranged in Scotland. However, it may prove difficult to find a lender that will lend you money if your postcode is not the same.
Due to the postcode restrictions in remote areas, such as the Highlands or islands, this can affect your access to mortgage products. A broker can help you find the best Scottish lenders and give you a quote if you’re interested in buying property in Scotland.
Although there are fewer lenders than ever in Scotland, the number of them has increased in recent years which means that they offer more competitive rates.
Calculating a bridge mortgage
Bridging loans are often taken out by people who intend to move onto a residential mortgage. This is called a Bridging Mortgage. It can be done with any lender, or with a different one depending on which lender is most likely to offer the best long-term deal.
Lenders will usually use a bridging mortgage calculator to calculate the initial amount required, followed by a standard mortgage calculator to determine how much debt from the bridging loans will be transferred onto the residential mortgage.
They will also use the standard criteria to determine your eligibility and what amount they are willing to lend as a mortgage. They will also consider your income, spending, credit history, age, and property.
The interest rate on a bridging loan will usually be lower than the one charged. The average term is 25 years, whereas the term for bridging loans ranges from 6 months to 2 years.
Ask for a custom quote from a specialist in bridging loans
Calculators for bridging loans can give you a good idea of how much money you could borrow and what amount you would be repaid over a short period. You can add to this the expertise of a broker who can help you understand all aspects of bridging finance. This includes how you qualify, what your exit strategy is and any renovation experience.
Our experts can assist you with the loan application, recommend the best bridging lender, negotiate terms, and help you transition to a bridging home mortgage if you choose.
To get an idea of the cost of a bridging loan, use our calculator. Then give us a call or submit an enquiry to speak with a specialist in bridging finance.