Free tool for UK landlords
Work out the gross loan, costs and the net loan you actually receive on a bridging deal. Bridging quotes are gross, so the cash in your hand is less once interest and the arrangement fee come off.
Fill in the fields to see your bridging finance calculation
Bridging is quoted as a gross loan, but that is not the cash you receive. The lender takes the arrangement fee, and on a retained deal the interest for the whole term, off the top, so the net loan in your hand is smaller. On a £200,000 property a £150,000 gross loan at 75% might come down to roughly £130,000 net once a 2% fee and 12 months of retained interest are deducted.
Always plan your purchase around the net figure, not the headline gross, or you can find yourself short before legal and valuation costs are even paid. This calculator works backwards from the net loan you actually need.
There are two ways to handle the interest. With retained interest the lender deducts the whole term's interest from the advance up front, so you make no monthly payments but receive less cash; it is the common choice on a refurbishment where the property earns nothing yet. With serviced interest you pay the interest monthly and receive more up front, but you have to show you can afford the payments.
The total interest is much the same either way; the difference is whether you pay as you go or have it taken off the top. Switch the interest type in the calculator to see the effect on the net loan.
Bridging is priced as a monthly interest rate rather than an annual one, usually somewhere around 0.55% to 1.5% a month depending on the loan to value, the property and your profile. On top of the interest you usually pay an arrangement fee, often around 2% of the gross loan, plus valuation and legal fees and a broker fee if you use one. Because the rate is monthly the cost adds up quickly, so it pays to keep the term only as long as you need.
Speed is the main reason people use bridging. A straightforward case can complete in a week or two, and some lenders move faster still, which is why bridging suits auction purchases with a tight deadline. The slower parts are usually the valuation and the legal work, so having your solicitor ready and the paperwork in order helps a lot.
Most bridging lenders cap the gross loan at around 75% of the property value, so you generally need at least a quarter of the value as deposit or equity, sometimes more for unusual property. Remember the gross loan includes the fee and any retained interest, so the cash you actually receive sits below that 75%. This calculator flags when the loan you want pushes past the usual limit.
The exit is how you repay the loan at the end of the term, and it is the single thing lenders scrutinise most, because a bridge with no clear way out is where deals go wrong. The two usual exits are selling the property or refinancing onto a longer term mortgage. If your exit is a buy to let remortgage, check the rent would cover it on the affordability calculator and see where rates sit on the indicative rates page before you commit.
Bridging fills gaps a normal mortgage cannot. Common uses are buying at auction where you must complete in 28 days, buying a property that is currently unmortgageable because it needs work, refurbishing before refinancing onto a buy to let, and breaking a chain by buying before you have sold. The common thread is a short term need for fast money with a clear plan to repay.
Bridging is easier to get than a mortgage, but the refinance or sale at the end is the harder part, so it is risky if you do not have a confident exit. It is a poor fit if you do not have enough total funds for the purchase, the works and the fees, if you are relying on house prices rising to make the numbers work, or if you cannot service the monthly interest on a serviced deal. Make sure you can actually get your exit before you start, not after.