New Calculator Is A Hit
The recently introduced bridging loan calculator from bridgingloans.co.uk has received nothing but excellent reviews from the users. The calculator was formulated for clients who are researching bridging finance outside what is deemed “normal working hours” or initially just looking for a rough speculative idea of the costs involved before speaking with an advisor.
The calculator is based on the calculation method used by the companies chosen main lender and allows an applicant to enter basic details and requirements into a table which when the “Calculate” button is pressed enables accurate figures to be presented on the interest rate chargeable, total monetary interest amount charged over the term, legal fees, valuation fees, other fees and total borrowing etc.
The applicant is required to enter, the number of properties to be used as security and the valuation of each of the properties. A better interest rate may be available if more than 1 property is used as security. The total valuation of all security properties is then automatically calculated.
The applicant then enters the net loan size required which automatically calculates the initial set up fees which when added to the net loan gives the total initial loan amount and in turn this automatically lists the interest rate percentage payable. In bridging finance the major driver determining the interest rate chargeable is usually the Loan to Value (LTV) which is the gross loan size (with all fees and added interest etc) in percentage terms when compared with the valuation of the security. The lower the LTV, the lower the interest rate charged. At the time of writing, the best interest rate is chargeable on loans below 40% LTV. Rates increase in a banding system thereafter i.e.
- < 50% - 0.75%
- < 60% - 0.80%
- < 65% - 0.85%
- < 70% - 0.95%
- < 75% - 1.15%
- *** 100% + borrowing is available with additional security ***
Any mortgages already secured on the property are entered at the next stage as this will affect the total LTV. The applicant then inputs the period the loan is required in term of months and the “Calculate” button is pressed.
After pressing the “Calculate” button, the total interest charged over the stated term is calculated along with the average monthly interest. When added to the initial loan and fees this automatically calculates the total borrowing. If the total borrowing at this stage increases the LTV into a new band the interest is automatically recalculated to reflect this.
Approximate valuation and legal fees are also listed giving the client a full picture of the possible costs of a bridging loan.
It is important to note that:
- interest generated throughout the life of a bridging loan is not normally payable on a monthly basis as with a mortgage but is added to the loan each month and repaid when the loan is repaid.
- bridging loans are more often than not arranged WITHOUT early repayment charges so in effect if a bridging loan is arranged for 12 months but repaid after 3 months, you would only pay the interest for the time that you have the loan i.e. 3 months, and usually repayment is perfectly acceptable without an early repayment penalty.