If you are looking for tips on how to use a bridging loan calculator and why they are important for potential borrowers, then this article is for you.
Firstly, a bridging loan calculator will help you understand how a bridging finance provider will draw up their quotes and how much these loans will cost.
Most lenders will have a calculator on their website to help give you a rough idea of how much someone can borrow using a bridging loan.
It’s important to appreciate that even though the calculator will give a good idea about the loan, you will still need to speak with an expert to arrange a bridging loan.
What a bridging loan calculator is
So, our first tip is to understand what a bridging loan calculator is.
Essentially, it’s a tool that a lender uses to work out how much they are willing to offer you when you apply for a bridging loan.
There are a few details to fill in and you’ll need to understand beforehand including:
- How much you are looking to borrow
- How long you need the money for
- How you are going to repay the loan.
How much you can borrow will depend on the value of the security property you will offer the lender to access bridging finance. Some lenders will offer a loan of several thousand pounds, and others will offer up to £1 million depending on the property you have and whether they have a first or second charge on it.
The issue of knowing how long you are needing bridging finance will have an impact on the interest rates and you need to appreciate that most lenders will offer a loan for up to one year, but some will offer up to 24 months.
The third issue we highlighted is how you are going to repay your bridging loan because this also affects the interest rate, and if you know when you can repay then you’ll be offered a slightly cheaper loan.
How a lender’s bridging loan UK calculator works
The second tip from The Bridge Crowd is to understand how a lender’s bridging loan UK calculator works.
As mentioned, you need to fill in a few details, including the term’s length, the net amount you are looking to borrow as well as details of any deposit and the security.
Using this information, the online bridging loan calculator will then deliver a quote that also has the interest charges added to it. There will also be other costs and fees to be considered including:
- Administration charges: all lenders will have an admin fee for processing your application
- Surveyor fees: all lenders will be looking to engage a surveyor to independently value the security property
- Legal fees: you will need to pay solicitors for arranging the loan
- Exit fees: you need to be wary about whether the potential lender has exit fees and many will not have this.
Bridging loan rates UK
Our third tip looks at the cost of a lender’s bridging loan calculator since you may find that the amounts being returned will vary between lenders – as will the bridging loan rates UK.
This is understandable because they will have different criteria with different administration charges and legal fees. The lender will also have a range of interest rates to apply.
A standard calculator will give a good idea of how much potential bridging loan will cost and you will still need to apply and negotiate with the potential lender.
All potential bridging loan borrowers should be looking at the fees and charges being levied and ensure there are no hidden surprises when you apply for a loan.
Bridging finance quote
Our final tip is to understand how the bridging loan calculator will be adding the interest to the bridging finance quote being offered. There are three ways that a lender may do this:
- Monthly interest: this interest is calculated in the same way as you would expect for an interest-only mortgage, for example. It’s an amount that will be charged monthly while the full loan amount will need to be paid at the term’s end
- Rolled-up interest: This is the amount of interest that is added to the loan and compounded every month. This also means the borrower does not have to repay a monthly amount and the cumulative total is then repaid in full when the loan falls due
- Retained interest: an online bridging loan calculator may work out how much interest is due when the loan starts and the borrower will be billed depending on the number of months that the bridging finance is taken over.
If you would like more help and information about using a bridging loan calculator, then you need to speak with the experts at The Bridge Crowd.