Bridging Loan Calculator | Calculate Effective Interest Rate

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What Is A Bridging Loan?

A bridging loan is a short term loan. The term “bridging loan” was coined as the loan bridges the gap until a long-term financing solution is implemented.  Whilst considerably more expensive than traditional buy to let mortgages, bridging loans offer greater flexibility and can potentially finance tricky property transactions.  

For example, a property investor may use a bridging loan when buying an uninhabitable property requiring major refurbishment. The investor buys the property and refurbishes it. After the property refurbishment has been completed, the investor will apply for a traditional buy to let mortgage. The bridging loan is then repaid using the new buy to let mortgage.

Another example is where a property developer uses a bridging loan to buy a property at auction. They buy the property, develop it, and eventually sell it on for a profit. The bridging loan is then repaid from the sales proceeds.

What Is A Bridging Loan Calculator?

Bridging loans have become increasingly common as property investors look to take advantage of market conditions and opportunities. A bridging loan calculator is a useful tool for any property investor looking into the bridging loan market.

A bridging loan calculator is a financial model that can be used to determine and understand the total cost of bridging finance.

Bridging loans are increasingly popular as property investors look to gain from the flexibility that the bridging finance offers. A bridging loan calculator is an invaluable tool that can be used by property investors to help them assess bridging loans quickly and easily.

 

Why Use A Bridging Calculator?

Taking the time to analyse your funding options can help you make an informed decision when it comes time to either get bridging finance or another form of property financing.

Bridging loans come with flexible interest rates and can be repaid at any time. This, combined with the shorter bridging loan term compared to other forms of property finance, results in bridging loans having higher interest rates. If you are using bridging finance to fund your property investment, expect to pay between 2-5% extra on top of the regular rate.

The bridging loan calculator gives bridging lenders an idea of what they are letting themselves in for, for example, how much the bridging finance will cost.

Using bridging loan calculator to establish the true costs of funding options will significantly reduce the risk that property investors make an expensive funding mistake.

Our Bridging Loan Calculator is a financial calculator designed specifically for bridging finance. It will help you assess whether a bridging loan deal is cost effective for YOU. 

The fees charged in bridging loan transactions are a mixture of percentage based fees and fixed amount fees.  This creates two challenges:

it is a mathematical challenge to accurately work out the true interest rate being charged. 

it is difficult to compare different loans

Our Bridging Loan calculator overcomes these obstacles by:

✅Helping you to calculate a single Effective Interest Rate. Investopedia defines Effective Interest Rate as “the real percentage rate owed in interest on a loan, a credit card, or any other debt”. 

✅Allowing you to input 2 loans side by side in a standard fashion, enhancing comparability

✅Facilitating the analysis of bridging loan opportunities in a consistent and timely fashion

✅Built using Microsoft Excel to ensure quick and easy implementation.

Once monthly interest rates and all relevant fees have been inputted, the Bridging Loan Calculator will provide you with a series of key financial metrics to aid your decision making.  These metrics include “Effective Interest Rate” and “Total Borrowing Cost”.

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Visit our partner Promise Money to get a bridging loan quote.

1.       Having worked with excel-based spreadsheets for over 14 years, one of the biggest risks is that the formulas get accidentally overwritten.  To manage this and other risks, the tool is locked and cannot be altered by you.  This is to ensure that the deal analyser continues to work accurately for you over the long term. Requests to unlock the calculator will NOT be granted.

2.      This product is designed for use with Microsoft Excel ONLY.

3.       The user should have a basic understanding of interest rates and how they are applied to loan amounts.

4.      The user should have some hands-on Microsoft Excel experience, ideally a minimum of 5 hours.