For anybody looking at bridge finance, a bridging loan calculator will be a term they see regularly and this article explains why such a calculator is crucial.
The most important aspect is to understand that the number and type of bridge financing products currently available has grown substantially in recent years which means potential borrowers may be confused about what these products offer.
In addition, the circumstances for which the money can be used and the borrower’s own criteria have also undergone a change.
Most people appreciate that a bridging loan was, and still is, traditionally used for bridging the time between the sale of an existing property and the purchase of a new one.
However, while this is still a leading reason for accessing bridging finance, the loans can also be used for a wide variety of other purposes including the refurbishment of property and buying a house at auction.
A bridging finance calculator is really a simplified calculator tool
The important point to remember about a bridging finance calculator is that it really is a simplified calculator tool so the borrower can see easily how a small change in their loan needs and repayment plans will impact the overall finance package.
For instance, it will soon become obvious for anybody looking for short term bridging loans that lenders have a range of interest rates for the money being borrowed.
To compound this issue, the lenders also offer a variety of loan sizes so while some may, for instance, offer a few thousand pounds in bridging finance, others will be offer more substantial amounts of several million.
Alongside this, there’s no set interest rate and bridging finance lenders offer different rates according to the amount being borrowed. For instance, the interest rate for a particular borrower may start at 0.49% and rise to 1.5%.
It should also be appreciated that the rates available are also dependent on the size of the loan and the type of property being purchased and for the security available.
Best rates offered on short term bridging loans UK
It’s also important to understand that the best rates offered on short term bridging loans UK are usually for those with a first charge on the security and there are lenders who offer finance on a property with a second charge.
As an example, for a £100,000 bridging property loan, the interest rate at 0.59% would mean monthly interest being charged of £590.
For someone borrowing the same amount with an interest rate of 1.5% then their monthly interest charge would be £1,500.
Indeed, the money and rate of interest a bridging finance borrower is looking for will also depend on the security they offer.
It’s also possible, for those who are looking to obtain larger bridging loans, to offer more than one security to secure a larger amount of cash.
Bridging finance calculator will need the borrower’s needs
The bridging finance calculator will need the borrower’s needs such as the amount they want to borrow and how long they want the money for; bridging finance is generally a short-term loan because of the interest rates being charged.
Some people who use traditional bridging loans may only need the money for a few months, while others may need it for a longer period of up to two years, most borrowers generally opt for 12 months.
For those who have the security and the need for a large amount of money, there are bridging finance firms who will offer a loan for as little as one day to enable the buying and selling of property, for example.
The bridging finance can then be used for buying or refurbishing investment, residential or commercial properties or even a variety of these to make up a portfolio.
There’s also a growing demand from businesses to use the money to fund a cash flow shortfall or to buy stock, for instance, for a sales campaign. The business owner can also use bridging finance to refurbish their premises.
Accessing bridging finance
For those interested in accessing bridging finance, they should also appreciate that many lenders will also charge an administration fee which could be up to 2% of the total amount borrowed though this does vary between lenders.
There may also be a broker’s fee to add and this could be up to 1% of the loan and has some lenders may also charge solicitor fees as well as a valuation fee depending on the loan’s purpose and security for it.
Essentially, the bridging loan calculator will reveal the monthly interest repayment for a particular loan and how much is repayable when the loan falls due.
It is also possible not to make monthly repayments for a bridge loan and have the interest ‘rolled-up’ instead so the borrower simply repays the entire amount when the loan comes to an end.
It is also recommended that borrowers shop around bridging finance lenders or approach a specialist broker who will search a wide range of lenders for the best criteria and rates that will suit a borrower’s need for short-term bridging finance.
A bridging loan calculator offers a simple way to understand what is on offer
Finally, while bridging loan calculators offer a simple way to understand what is on offer and how much a short-term loan will cost, it should be appreciated that they are really a reference tool and for actual rates and terms, a bridging finance borrower should contact a lender or broker to find out exactly which products will be available for the borrower’s requirements and their own circumstances.
For many potential bridging finance borrowers, this means contacting The Bridge Crowd who can explain more about using a bridging loan calculator and to explain the pros and cons of this form of alternative finance.