Bridge Loan Calculator
Bridge loans, also known as gap financing or interim financing, are short-term loans designed to help borrowers bridge the gap between two transactions, typically the purchase of a new property and the sale of an existing one. Bridge loans are usually used to finance the down payment on a new property while the borrower waits for their current property to sell.
This Bridge Loan Calculator calculates if you need a bridge loan and its payment amount when selling one property while buying another. Also:
- Create a payment schedule showing payments for both loans
- The equity in one property is used as collateral for the bridge loan
- The bridge loan is paid-in-full with the proceeds from the sale of the first property.
To use the bridge loan calculator, the user will need to provide the following inputs:
- Purchase price - The total cost of the new property.
- Cash available - The amount of cash the borrower has available to put towards the down payment.
- First mortgage amount - The amount of the first (or primary long-term) mortgage on the new property that the borrower plans to take out.
- First loan's interest rate - The interest rate on the first mortgage.
- First loan's term - The length of the first mortgage, typically 15 or 30 years.
- Bridge loan interest rate - The interest rate on the interest-only bridge loan.
- Anticipated bridge loan term - The length of the bridge loan, typically 6 to 12 months.
More below
Information
Once the user has provided these inputs, the bridge loan calculator will provide the following outputs:
- Bridge loan amount - The amount of the bridge loan needed to finance the down payment.
- Monthly interest-only payment - If the bridge loan requires the debtor to pay only the interest due, this output will display the monthly interest-only payment amount.
Click on the "Help" button for more details and an example.
This loan calculator creates printable loan schedules with dates.
- Calculate unknown payment, term, interest rate, or loan amounts
- Saves to Excel & Word files.
- Print or export colorful charts
- Supports extra payments too!
Bridge loans may be risky
Bridge loans can be risky because they often come with high-interest rates and fees, and they are typically secured by the borrower's current property. If the borrower is unable to sell their property quickly, they may be unable to pay back the bridge loan, which could lead to default and potentially losing their current property. Additionally, the borrower may be subject to penalties if they are unable to pay back the bridge loan on time.
To minimize the risks associated with bridge loans, borrowers should carefully consider their financial situation and ensure that they have a solid plan for selling their current property before taking out a bridge loan. They should also shop around for the best rates and terms and avoid lenders who charge excessive fees.
Bridge loans are most commonly reserved for real estate financing though they don't have to be. A bridge loan is usually a short term loan that provide funds for purchasing an asset (such as a home) when the cash-on-hand along with the primary loan is not enough to pay for the asset.
For example, if you currently have $50,000 cash and a home that you are selling for $400,000 for which there is a balance on the mortgage of $200,000 and you plan to buy a home for $800,000, you might be a candidate for a bridge loan.
If the lending institution for the new mortgage requires that you put a deposit of 20% down, $160,000, at closing, you will not have the cash if the closing has not taken place on your current home. This is where a bridge loan can be used.
-$50,000 cash on hand
-$640,000 mortgage available
$110,000 covered by bridge loan
The new home mortgage will be $640,000 (800,000 - 160,000 = 640,000). The selling price less the cash on hand and the mortgage money available leaves a short of $110,000. This is the amount covered by the bridge loan. A bridge loan is typically an interest-only loan. This means you make only interest payments. The loan is also usually a short term loan offered at a higher interest rate. The idea is that once the first property is sold, the bridge loan will be paid off immediately from the $200,000 net proceeds from the sale of the first house.
That's the background. This calculator will calculate your total payment for the primary new mortgage and the interest-only bridge loan payment. The bridge loan has no term for it is due when the closing occurs on the first house. The only thing you have to know about the bridge loan is the annual rate of interest you'll be charged.
"Anticipated Bridge Loan Term? (#)" — Enter number of months you anticipate needing a bridge loan. That is, how many months you think it will be until you close on the property you are selling. This value does not impact the bridge loan amount. It impacts the payment schedule and charts.
This calculator makes these assumptions:
- Payments for both loans are made monthly
- The bridge loan is an interest-only loan (payments never go toward principal)
Adiel says:
Hi Karl,
That is an interesting calculator, is it available for websites to use. I run a bridging loan company in London U.K, I’m just curious
Karl says:
Thanks, Adiel. At this time, the calculator is not available for other sites.
Adiel Khan says:
Ah ok, could you let me know if any bridging loan calculators become available?
I’d appreciate it. I do have one on a page but the design is not so good and I cant seem to find any online. I think I stumbled on your site before about 18 months ago when I was searching for a calculator. Did you have an article on the subject before?
By the way, can I send an email on an unrelated subject?
Karl says:
Yes, I’ll let you know should I come out with a bridge loan calculator plugin for other sites.
I’ve not written any articles about bridge loans. In fact, I recently was reminded that written instructions for this page are missing!
Yes, feel free to send.
Mary says:
Karl, I’m confused with the calculation. My current home is paid for and can easily be sold for $575,000. I want to purchase a home for $575,000. Am I only taking a bridge loan for the 20% down payment ($115,000). Thank you for your time.
Karl says:
Ok, but since you didn’t ask an actual question, I can only guess as to what you find confusing.
You don’t really need to worry about the value of your current home, at first. The purpose of this calculator is to tell a user if a bridge loan is needed. If a bridge loan is needed (based on the cost of the new home, and the cash available for the down payment) then users can look to the equity they have in their current home. If they have enough equity, they can use the equity by borrowing against it for the "bridge loan."
Just answer the questions, can click calc.
Does this clear things up? If not, please ask again.
Andy says:
Karl,
I’m looking at a new home purchase price of $275,000 max, $0 (zero) cash available, $38,000 and 89 months left on existing mortgage at 3.375%. Assuming 20% down payment and a Bridge Loan Interest Rate of 5.375%, have I input everything into the calculator correctly?
Purchase Price: $275,000
Cash Available: $0
First Mortgage: $220,000
1st Interest Rate: 3.375%
1st Term (Months)#: 89
Bridge Loan Interest Rate: 5.375%
Anticipated Bridge Loan Term(#): 6 [months]
Bridge Loan: $55,000.00
First Mortgage Payment: $2,797.63
Bridge Loan Payment: $246.35
Both Payments Total: $3,043.98
The result for the 1st mortgage payment with 89 for the 1st term number seems awfully high which is why I am asking. Also, what purpose does the Anticipated Bridge Loan Term serve? It doesn’t affect the calculation in any way regardless of the number entered.
Thank you for your time sir.
Karl says:
Hi Andy, everything appears to be fine except for the first term. The 89 months left is for the current mortgage. How long do you want the new mortgage to be? One you set it to something a bit more reasonable, the first mortgage payment will be less.
Note, this calculator is not going to include the payment amount you are currently making on the existing mortgage. So you’ll need to add that to the Both Payments Total to know your total monthly obligation until you sell your exiting property.
G. Rae says:
Here’s our situation. We are mortgage free in our home worth $500K and also own a cottage. We would like to sell the house and move to the cottage but it would need to be demolished and rebuilt. Rebuild costs would be between 250K and of course we don’t have that lying around. What would be our best option for temporary financing – bridge or line of credit type of financing. We figure it would take maybe 8 months to build.
Karl says:
Your question – What would be our best option for temporary financing, is not one that I’m prepared to answer. I can’t give advice because I don’t know your personal situation or where you are from (taxes may have an impact).
However, there are two options that you can consider.
The loan with the lowest interest rate would generally be the better option.
There might be other financial products as well that you could use.
If you want to keep track of the payments and interest you are being charged during the construction period, you can use this construction loan calculator.
Louie O says:
Selling my current house for $360,000 (owe 316k) @ a 3.185% and buying a new one for 436k. I have 40k cash but only want to put down 5%. Does this mean that it will cost me 2k a month for the loan?
Karl says:
Sorry, but I’m not following you. This calculator tells the user if they will need a bridge loan.
In my head, it doesn’t look as if you need a bridge loan. You are buying a home for $436k and you want to put down 5%, which is $21,530. You already have more than enough cash for the 5% down payment. No bridge loan is needed. The question is, will the lender issue the loan per the terms you want?
What question are you trying to answer?
Mark B Weyland says:
I want to relocate in the same area but into a smaller house.
I currently own my house which is worth ~$400,000.
Due to the sellers housing market in Sarasota, I want to buy a home before selling the existing property. I hope to buy at around $300,000-350,000. I can put down a 20% deposit.
Is a bridge loan the only option for me ?
Karl says:
Your question is about what financial products might be available to you. Those I can’t answer (I don’t know your personal situation. Nor do I know what financial products are available in your area.)
Do you have a question about how the calculator works or the results you are getting?
william says:
current mortgage:
home value: $200,000
amount owed: $140,000
current rate: 5%
I want to purchase a home while I sell my current home.
new home purchase price: $470,000
need 5% down
have $5,000 cash
can I secure a bridge loan to purchase this new home?
Karl says:
Are you asking how to use the calculator?
Since you do not have the cash required for the down payment but you do have adequate equity in your current home, a bridge loan might be a good source of funds for you.
Your entries might look something like this. (I’ve estimated the bridge loan interest rate.)
Randy Johnson says:
Generally how long does pre-approval take?
Karl says:
I’m only able to answer questions about the calculators on this site. Pre-approval depends on factors that I have no knowledge about, such as your credit history and even perhaps where you are located.
Maureen O'Donnell says:
Not sure what to enter on the calculator. Not sure what it means when it says first mortgage. We own a home valued at about 260,000 in which we owe about 90,000 with 52 months left on a 15 year mortgage. We want to buy a 2 unit home for about the same value as our home with our home to sell within 12 months. Limited cash for down payment. Current interest rate is about 4 percent.
Karl says:
I certainly need to add some instructions to this page. Sorry not to have been clear.
The calculator answers the questions, "Do I need a bridge loan?" and "If so, how much will it be?"
The "first mortgage" is the primary mortgage for the new home.
So, if you the new, 2 unit home will cost about 260,000 and you plan to take out a primary mortgage of about $208,000, then your first mortgage is $208,000. If you enter the cash available, then the calculator is going to calculate the size of the bridge loan that you’ll need. Compare that to the equity you have in your current home to see if you can use it for collateral for a bridge loan if needed.
Hope this helps.