LEADING UK BROKER FOR
Bridging Loan Calculator
LEADING UK
BROKER
FOR BRIDGING
LOANS
SINCE 2004
- Residential property – NOT regulated by the Financial Conduct Authority (FCA), e.g. Buy to Let, HMO.
- Permitted development scheme – for which planning consent has already been granted for conversion of the asset being used to secure property funding.
Commercial bridging loans: Please contact Loan X for your bridging finance quote.
Full Term Interest versus Redemption Amount
The interest charged will be less if the loan is redeemed before full term.
Loan amount interest will then be recalculated against the redemption amount based on the revised length of time of the bridging loan arrangement.
While the loan calculator figures generated are an accurate appraisal, it is important to note they are intended as general guidance only.
Please contact Loan X at any time and we will be pleased to provide you with a detailed, accurate bridging loan quote, and approval.
Loan To Value (LTV) is a financial term used by lenders to express the ratio of a loan to the value of an asset purchase. Loan to Value is central to deciding the loan amount interest rate charged to the borrower.
The bridging loan to value (LTV) and monthly interest rate will be dependent on:
- Property asset value
- Type of security property asset
- Property asset location
- Credit profile of the borrower
- <span”>Client experience, knowledge and aptitude
Additional Bridging Loan Fees and Costs
Bridging loan costs mainly comprise interest charges and arrangement fees added to the loan.
All bridging loan applications include a number of professional fees, which need to be fully understood and budgeted for at the outset.
It’s important to be aware that fees are not fixed, and the lender will provide a quote at the appropriate time.
The total borrowing cost of bridging finance should always be factored in rather than only considering the arrangement fee and interest rates.
Arrangement fee: The typical lender’s fee is 2% of the bridging loan amount, deducted from the gross bridging loan amount on completion.
Admin fees: Additional fees of a varying amount charged by the lender, apart from one or two exceptions, are usually deducted from the gross loan amount.
Legal fees: Borrower will be liable for their own legal fees and those of the lender. In some cases, dual representation can be used, which helps reduce the fee amount. Legal fees are usually payable in advance under a formal legal undertaking.
Valuation fees: Most bridging loans require a valuation, except by a few specialist bridging loan lenders when lending against ‘good security properties’ and ‘good clients’ at quite low LTVs.
The valuation fee is usually payable in advance, with the amount charged dependent on:
- Property asset value
- Type of property asset
- Location of property asset
- Any work is to be carried out
Quantity surveyor: Lending company may require a quantity surveyor report or a monitoring surveyor’s initial report to ensure the estimated build costs for property development or heavy refurbishment are accurate.
The fee will be determined by:
- Market value of the property asset
- Amount of work being carried out to the security property.
Supplementary professional reports:
A loan borrower may be liable for a specialist’s report and any quoted remedial works required if the valuer finds any areas of concern such as, Japanese Knotweed, asbestos, subsidence, damp or structural problems.
Inability to repay the loan at the end of the term will require refinancing or servicing of the loan, which may not be acceptable to the lender.
While the Exit fees are not always charged, they will still need to be accounted for by the loan borrower when calculating the redemption amount on settlement of the outstanding loan balance.
Additional fee NOT usually added by Loan X:
Broker fee: Charge not always applied for straightforward, residential bridging loans. However, when charged, it is typically 1%, which is also deducted from the gross loan amount on completion.<
PLEASE NOTE: Loan X DO NOT usually charge an assessment fee.
Bridging Loan Approval
All property asset types are usually accepted, and First and Second charge bridging loans* are available.
*First and Second Charge Bridging Loans
A ‘first charge’ is the primary mortgage or loan which takes precedence over all other finance secured against the property.
A ‘second charge’ loan could be secured against the property if there is sufficient equity.
Typical bridging finance criteria:
Bridging loans from £50,000 to £100 million+
Loan term from 1 month to 24 months
Bridging finance available throughout the UK and Western Europe
Loan Amount Eligibility
Poor credit history is usually not a barrier nor income necessarily an important factor.
Credit History – CCJs, defaults and arrears are considered, and usually accepted, provided the bridging loan exit is not dependent on refinancing.
No income proof required – except when the loan is to be repaid through refinancing or if the loan borrower is planning to service the monthly interest.
Bridging loans are available to individuals, partnerships and limited companies.
Eligibility includes:
Individuals
Individuals with Equity in their Property
Individuals, either employed or self employed
Individuals who cannot prove their income
Individuals with almost any credit status, good or bad
Individuals with Poor Credit
Loan borrowers must be between 21 and 75
UK and overseas residents welcome
UK Ltd Companies
UK Ltd Companies with Poor Credit
Limited Liability Partnerships (LLPs)
Trusts
How Bridging Loan Interest is Calculated
- Monthly interest rate charges
- Arrangement fee/facility fee amount
- Any broker fees or exit fee, if charged.
The net loan amount will be dependent on:
- Bridging loan product
- Monthly interest rate charged
Bridging Loan Additions and Deductions
Typically, the bridging loan interest plus arrangement fee will be deducted from the gross loan amount, to arrive at a net bridging loan figure.
When a bridging loan is used to refurbish a residential property, a number of lenders will allow the monthly interest to be added to the net loan amount.
This can be useful if the required net loan amount needs to be increased. However, the facility fee and broker fee will still be deducted from the gross loan amount.
Calculating and Charging interest: Example
For example:
| Property market value: | £500,000 |
| Bridging Loan LTV: | 75% |
| Term: | 12 months |
| Gross loan amount: | £375,000 |
| Interest charge: | 0.75% per month |
| Interest amount: | £2,812.5 per month |
| Total interest: | £33,750 |
| Facility fee @2%: | £7,500 |
| Day one net loan: | £333,750 |
Settlement amount if loan kept for 6 months:
£333,750 + 6 months interest = £350,625
Types of Property Assets Used as Security for Bridging Finance
Houses, flats, maisonettes, bungalows and HMOs
Commercial property, if being converted to one or more residential properties, e.g. an office with permitted development rights.
Multiple security properties
Properties ineligible for a mortgage
Refinancing of partially completed buildings, provided they are weatherproof
Difference Between a Mortgage and a Bridging Loan
A mortgage arrangement is basically a long term loan which requires to be repaid in monthly instalments.
Bridging loan rates tend to be slightly higher than a mortgage but are often more cost-efficient in the long term, once early repayment charges (ERCs) are taken into account.
There are a number of Bridging Loan uses:
Expedite rapid refinancing of a property asset
Short term financing to apply for planning permission
When conventional credit is refused
Buying a property at auction needing to complete within 28 days
Obtaining an otherwise un-mortgageable property
Buying a property prior to the sale of an existing property
Buying an undervalued property from an LPA Receiver
Borrowing against value, not purchase price
Funding a property refurbishment project
Refurbishing a property to then sell on or refinance
Buying with a deferred consideration when net loan amount is insufficient
Purchasing an uninhabitable property or which requires refurbishment.
Buying a property with intention to change the title
Acquiring working capital or urgent financial liquidity
Loan borrowing without monthly payments or interest added to the loan
Do I Need to Get a Valuation?
There are specific circumstances, in which some specialist lenders will not require a valuation:
- When the underlying property asset is strong, and
- LTV (loan to value) is low
Instead, the bridging loan provider will either rely on their internal asset manager or will use an AVM (Automated Valuation Model), otherwise known as a desktop valuation, using mathematical modelling combined with a database.