Bridge Loan Calculator
Introduction to the Bridge Loan Calculator
Bridge loans—also called gap financing or interim financing—are short-term loans. They help borrowers bridge the gap between two transactions. This is typically the purchase of a new property and the sale of an existing property. Borrowers usually use bridge loans to finance the down payment on the new property while they wait 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 must provide the following inputs:
- Purchase price—The total cost of the new property.
- Cash available—The amount of cash the borrower has available to apply to the down payment.
- First mortgage amount—The amount of the first (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…
The Calculator-Calculate a Bridge Loan Payment Amount
Information
The results
After the user provides these inputs, the bridge loan calculator will display 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 borrower to pay only the interest due, this output shows the monthly interest-only payment amount.
Click the “Help” button for additional details and an example.
Bridge loans may be risky
Bridge loans can be risky because they often include higher interest rates and fees, and they are typically secured by the borrower’s current property. If the borrower cannot sell the property quickly, they may be unable to repay the bridge loan. This can result in default and the potential loss of the property. In addition, the borrower may face penalties if the loan is not repaid on time.
To reduce the risks associated with bridge loans, borrowers should carefully review their financial situation and confirm that they have a clear plan to sell their current property before taking out a bridge loan. Borrowers should also compare lenders, seek competitive rates and terms, and avoid lenders that charge excessive fees.
Bridge Loan Calculator Help
Bridge loans are most commonly used for real estate financing, although they do not have to be. A bridge loan is usually a short-term loan that provides funds to purchase an asset (such as a home) when the cash on hand and the primary loan together are not enough to pay for the asset.
For example, assume you have $50,000 in cash and you are selling a home for $400,000 with a remaining mortgage balance of $200,000, and you plan to buy a new home for $800,000. You may be a candidate for a bridge loan.
If the lender for the new mortgage requires a 20% down payment of $160,000 at closing, you will not have enough cash if the closing on your current home has not yet occurred. 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 funds available, leaves a shortfall of $110,000. This amount is 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 short term and offered at a higher interest rate. The intent is that once the first property is sold, the bridge loan is paid off immediately from the $200,000 net proceeds from that sale.
This is the background. This calculator will calculate your combined payment: the payment for the new primary mortgage and the interest-only bridge loan payment. The bridge loan does not have a fixed term because it is due when the first house closes. The only information you need for the bridge loan is the annual interest rate you will be charged.
“Anticipated Bridge Loan Term? (#)” — Enter the number of months you expect to need the bridge loan. This is how many months you think it will be until you close on the property you are selling. This value does not affect the bridge loan amount. It affects 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 reduce principal).
Kenneth Bulas says:
currently in attorney. Selling price of current home is $480,000. No mortgage. Need $180,000 for purchase of new home. Bridge loan needed for 2 months to close on new home before closing on current home. How do I fill out the chart.
Karl says:
I certainly see that I need to add more documentation for this calculator.
The $180,000 for the new home, is that the total purchase price? Or, what’s the cost of the new home, and how much will the new mortgage be (that the value for 1st mortgage)? Do you have any cash-on-hand?
The point of this calculator is to see if you need a bridge loan, and if you do, calculate a total payment of the new mortgage and the bridge loan.
Karl says:
You already understand that you’ll need a bridge loan. If you are not taking out a mortgage on the new home, and the bridge loan is the only loan, then this calculator is not what you need (it is for when there are two loans on the new property).
Use this loan calculator to calculate the details and create a schedule for the bridge loan.
Cat says:
What is the average monthly interest rate for a mortgage bridge loan through a b or c lender in Canada?
Karl says:
Sorry, but I don’t track interest rates.
Zenon Frencel says:
My current house is value 850000 to 900000.Iheve no mortgage.
New house cost 560000.I need bridge mortgage for 3 to 6 months.
I paid downpayment 50000.Can i get bridge mortgage?
How match this mortgage will cost
Karl says:
The calculator helps you to determine that. However, I don’t know what it will cost because I don’t know the interest rates in your area.
Do you have a question about the calculator?
Mich says:
Need bridge loan. Selling house but not for a few months (5) equity is over 900k – buying house sooner for 899k interest rate is 9.9 for 6 months . Is there a monthly payment or do the payments get rolled in at the end?
Karl says:
It seems your question is about the terms of a bridge loan (as opposed to a question about how to use the calculator). That depends on the lender. You should ask them.
In general, however, one would make monthly payments toward the bridge loan.