Bridging Loan Calculator

What Is a Bridging Loan?

A bridging loan is a short-term secured loan used to bridge a gap in financing. It is typically used when you need to complete a property purchase quickly and a traditional mortgage is either too slow or not yet available. Bridging loans are commonly used for auction purchases (where you must complete within 28 days), chain breaks (buying before your current property sells), property renovations, and development projects.

Terms usually range from 1 to 18 months, with interest charged monthly rather than annually. Most bridging loans are interest-only, meaning you repay the full capital at the end of the term along with any outstanding interest.

How Bridging Loan Costs Are Calculated

Bridging loan costs have three main components: interest, arrangement fees, and exit fees.

Interest is quoted as a monthly rate, typically between 0.5% and 1.5% per month. A rate of 0.75% per month on a £200,000 loan equals £1,500 per month in interest.

Arrangement fees are charged by the lender for setting up the loan, usually 1% to 2% of the loan amount.

Exit fees are charged when you repay the loan, typically 1% of the loan amount.

Serviced, Rolled Up, and Retained Interest

Serviced interest means you pay the interest monthly. The loan balance stays the same throughout. This is the cheapest option because interest does not compound.

Rolled up interest means no monthly payments. The interest is added to the loan balance each month, and next month’s interest is calculated on the higher balance. This means interest compounds, making it more expensive than serviced. However, it requires no cash flow during the loan term.

Retained interest means all the compounded interest for the full term is deducted from the loan upfront. You receive less cash on day one, but there are no payments during the term. The total interest cost is the same as rolled up because the compounding calculation is identical.

When Does a Bridging Loan Make Sense?

• Auction purchases. You have 28 days to complete. A bridging loan can be arranged in days.
• Chain breaks. Buy your next home before selling your current one.
• Renovation projects. The property is not mortgageable in its current state. Bridge it, renovate, then remortgage.
• Below market value purchases. Speed is critical to secure the deal.
• Development. Larger projects needing development finance or a bridge before construction.

First Charge vs Second Charge

A first charge bridging loan sits as the primary debt on the property. A second charge bridging loan sits behind an existing mortgage. Second charge loans carry higher rates but let you raise capital without disturbing your existing mortgage.

Regulated vs Unregulated

If the loan is secured against a property you or a family member will live in, it must be FCA regulated. Investment and commercial property loans are unregulated, meaning faster processing but fewer protections.

Frequently Asked Questions

How fast can a bridging loan complete?

As fast as 3 to 7 days for straightforward cases. More complex deals take 2 to 4 weeks.

What deposit do I need?

Most lenders offer up to 75% LTV, so you need a 25% deposit. Some go to 80%.

Can I get a bridging loan with bad credit?

Yes. Bridging lenders focus more on the property and your exit strategy than your credit score.

What is an exit strategy?

How you plan to repay the loan. Common exits include selling the property, refinancing to a mortgage, or selling another asset.

Speak to a Mortgage Adviser

If you have questions or want to discuss your options, book a free discovery call below.

Book a Free Discovery Call

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Your home may be repossessed if you don’t keep up repayments on your mortgage.

Knox Mortgages is a trading style of Fort Advice Bureau which is regulated and authorised by the FCA to conduct Mortgage and Protection business, FRN: 972730