Why Use A Bridging Loan Calculator?
Bridging finance is a niche form of lending which is much less common and far less understood than more traditional types of funding such as mortgage finance. We have found that many of our customers who are looking at bridging finance in the initial stages do not want physical or verbal contact and instead they want all the information and data on hand.
If you think that you may potentially need a bridging loan but are unaware of how they work, you can try different values through our specially created bridging loan calculator to determine the terms and schedule of your loan repayment until you find a value that fits your budget.
Once you have found a bridging loan amount that you would like to apply for, you can get in touch with one of our financial advisors who will discuss your loan application further.
Our team are available from 9 – 9 throughout the week who can be contacted via live chat, email or telephone.
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What is a Bridging Loan?
Bridging loans are used for a short term requirement or to release money quickly. Bridging loans are usually repaid within 12 months as the rate of interest is often higher than standard high street rates thus making it too expensive to borrow long term.
Developers & investors have been using bridging loans for many years to take advantage of market conditions or undervalued investment opportunities. Being able to purchase a property quickly offers numerous advantages to the purchaser such as negotiating the best price and beating competitors to the deal.
A very common use of a bridging loan is when investors are looking to purchase at auction. You are normally required to fully fund an auction purchase within 28 days of a successful bid. Failure to pay in the given time frame may mean that you lose all or part of the 10% deposit placed on the property when your bid was accepted. Bridging loans can be pre-approved ensuring that you can bid with confidence and without worry of losing your deposit.
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Understand Our Bridging Loan Rates
When considering a bridging loan, which is a short term loan until a longer solution is available, the key aspect to consider is its viability. The most likely indicator of whether this finance would be viable would depend on the bridging loan rates available at the time. Bridging loan rates could be influenced by the Bank of England base rate and depending on circumstances can vary between 0.37% and 1.5% per month.
A bridging loan typically runs from 0 – 12 months, and in certain circumstances, can be extended longer.
Typical bridging loan criteria are as follows:
- 0.37% – 1.5% monthly interest rate
- 75% Loan to Value (LTV) – This can increase to over 100% with additional security.
- Arrangement fee of 1 – 2%
- No exit fee (on certain products)
- No minimum term i.e. loans can be repaid after a day
The table below resembles a typical loan repayment on £100, 000
Bridging Loan Arrangements
Our standard LTV-based interest rates are as follows:
||Interest Per Month
|LTV up to 50%
||0.49% per month
|LTV from 50% to 65%
||0.64% per month
|LTV from 65% to 70%
||0.84% per month
|LTV from 70% to 75%
||0.94% per month
We typically use the OMV (Open Market Value) of a property in order to calculate the LTV amount. However, OMV figures do tend to be slightly higher than forced sale or 90 day valuations.
Lenders Facility Fee / Arrangement Fee
Although we often charge lower rates, a standard lenders fee of 2% is usually applied when arranging bridging loan finance. We base this on the gross amount borrowed.
|£75,000 to £150,000
|£150,000 to £750,000
When calculating the arrangement fee using the figures provided above, it is important to consider that the minimum loan duration is 30 days. If you repay the loan before this period has elapsed, you will still be charged 30 days full interest. Once this period has passed, we will only expect you to pay interest up to and including the date that you have completed the full repayment.
The products outlined above have no exit fees, no default interest rates, no penalty fees and no early redemption charges.
Short Term Borrowing Plan
If you are looking to borrow up to 60% LTV over a 24-month repayment period then why not consider our short-term loan plan.
Our short-term property financing options have the following advantages:
- Borrow up to 60% LTV over 2 years
- Fixed arrangement fee of 2%
- Interest paid monthly or at the end of the loan term
It is important to consider that our short term borrowing plan typically takes longer to set up than a standard bridging loan and that the fees are somewhat higher than for loan products that are repaid in 12 month period.
Bridging Loan Costs Explained
Several factors affect the cost of borrowing when applying for bridging loan products. First and foremost is the interest rate, which is typically expressed as monthly percentage. Interest rates are primarily influenced by the amount borrowed and are LTV based.
You should always remember that bridging loans are only intended as a short-term borrowing option as the interest rates can be quite high in comparison to long-term products.
Other costs to consider when applying for bridging finance are:
Most bridging finance brokers charge a fee for their services.
Some, but not all, lenders charge an exit fee – which they add to the loan amount when you make the final repayment. With UK Property Finance, there are no exit charges to pay.
When applying for bridging finance, there is usually a lenders fee involved – ranging from 0% to 2%, depending on the amount borrowed. This is included in the loan costs.
As well as paying your own solicitor’s costs, you will usually be expected to pay the lenders costs in exchange for them setting up the bridging loan. Legal fees can vary greatly from one lender to the next.
Interest Roll Up
Although most interest charges are paid monthly on a bridging loan, many lenders offer the option to roll up the interest, which means that the interest is charged in full at the end of the loan term.
If you are unable to provide an adequate surveyors report, a property valuation will need to be carried out before the loan application is completed. In most instances, you will be expected to pay for this upfront. The money is usually paid directly to the surveyor undertaking the valuation.
Most bridging loan lenders will offer a concessionary rate of interest that is applicable provided you stay within the repayment terms. If you make your payments on time and stay within the agreed repayment period, you will usually be given a lower interest rate as an incentive. However, if you stray outside the agreed repayment period or you miss a payment then you will often be liable to pay a higher rate of interest.
Additional Factors That Influence Bridging Loan Interest Rates
Although the fees and rates charged vary considerably from lender to lender, several factors will influence the amount you will be able to borrow and the interest rates you will be charged when applying for bridging finance.
These are as follows:
- The Loan to Value amount
- The type of property offered as security
- The condition and location of the property
- The type of legal charge you have on the property
- Your monthly income and ability to make the repayments
- Your credit history
- The duration of the loan
- The cost of lending and affordability of the loan from the lender’s viewpoint
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