Bridging Loan Calculator

A bridging loan is a form of short-term secured finance used in the UK property market to bridge a gap in funding. Whether you are purchasing a property at auction, funding a renovation before remortgaging, or buying a new home before selling your existing one, a bridging loan provides fast access to capital that would otherwise take weeks or months to arrange through a traditional mortgage. Bridging loans are typically arranged for periods of 1 to 24 months and are secured against property. Unlike standard mortgages, bridging loans are interest-only during the term -- you do not make capital repayments. Instead, the full loan amount is repaid at the end of the term (the exit), usually through the sale of the property or refinancing onto a longer-term mortgage. The cost of a bridging loan consists of three main components: monthly interest, arrangement fees, and exit fees. Monthly interest rates in the UK typically range from 0.4% to 1.5% per month, depending on the lender, the loan-to-value ratio, and the exit strategy. Arrangement fees are usually 1-2% of the loan amount, and exit fees range from 0% to 1.5%. These costs add up quickly, which is why bridging loans should only be used for short-term purposes with a clear repayment plan. Bridging loans are regulated by the FCA when they are secured against a property that the borrower or a family member occupies or intends to occupy. Unregulated bridging loans apply to commercial or investment properties and have fewer consumer protections. Understanding the total cost of a bridging loan is essential before proceeding, as the combination of high interest rates and fees can make them an expensive form of finance.

How to Use This Calculator

To calculate the cost of your bridging loan: 1. Enter the loan amount. This is the total amount you need to borrow. Bridging loans typically range from GBP 50,000 to several million pounds. Most lenders offer up to 70-75% loan-to-value (LTV) on residential property and 60-65% on commercial property. 2. Set the monthly interest rate. Bridging loan rates are quoted monthly, not annually. Current UK rates typically range from 0.4% to 1.5% per month. The rate depends on the LTV, the property type, your credit history, and the strength of your exit strategy. 3. Enter the loan term in months. Bridging loans run from 1 to 24 months. Most are arranged for 6 to 12 months. Choose the shortest realistic term, as the longer you hold the loan, the more interest you pay. 4. Set the arrangement fee percentage. This is the lender's fee for setting up the loan, typically 1-2% of the loan amount. Some lenders charge higher arrangement fees in exchange for lower monthly rates. 5. Set the exit fee percentage. Not all lenders charge exit fees, but where they do, it is typically 1% of the loan amount. Check whether the exit fee is based on the original loan amount or the outstanding balance at the time of exit. 6. Review the results. The calculator shows your monthly interest cost, total interest, total fees, and the overall cost of borrowing. The effective annual rate converts the monthly rate to an annualised equivalent for comparison with other finance products.

How It Works

Bridging loan calculations are simpler than amortised mortgage calculations because bridging loans are interest-only. The monthly interest is simply the loan amount multiplied by the monthly interest rate. For a GBP 300,000 loan at 0.75% per month, the monthly interest is GBP 300,000 x 0.75% = GBP 2,250. The total interest over the term is the monthly interest multiplied by the number of months: GBP 2,250 x 12 = GBP 27,000. The arrangement fee is GBP 300,000 x 2% = GBP 6,000, and the exit fee is GBP 300,000 x 1% = GBP 3,000. The total cost of borrowing is therefore GBP 27,000 + GBP 6,000 + GBP 3,000 = GBP 36,000. The effective annual rate (EAR) converts the monthly rate to an annual equivalent using the compound interest formula: EAR = (1 + monthly rate)^12 - 1. For 0.75% per month, the EAR is (1.0075)^12 - 1 = approximately 9.38%. This is significantly higher than the simple annual rate of 9% (0.75% x 12) because of the compounding effect, and helps you compare bridging loan costs against annualised rates from other lending products.

Bridging loans come in two types: closed bridge and open bridge. A closed bridge has a fixed repayment date (for example, tied to a property sale that has already exchanged contracts). These typically attract lower rates because the lender has greater certainty of repayment. An open bridge has no fixed repayment date, offering more flexibility but usually at a higher rate. Interest can be paid in three ways: monthly (serviced interest), where you pay interest each month during the term; retained, where the total interest for the full term is deducted upfront from the loan proceeds; or rolled up, where interest is added to the loan balance each month and repaid at exit. Retained and rolled-up interest mean you receive less than the headline loan amount but make no payments during the term. Before taking out a bridging loan, ensure you have a clear and realistic exit strategy. The most common exit routes are selling the property, refinancing onto a standard mortgage, or completing a development and selling the finished units. If your exit strategy fails and you cannot repay the loan on time, the lender can charge penalty interest and ultimately repossess the property. Always take independent legal advice before proceeding.