Establishing Affordability with a Bridging Loan Calculator
A bridging loan calculator can be an invaluable tool when assessing the affordability of a bridging loan, prior to applying. Bridging loan rates (when considered as an APR) appear elevated, due to the short-term nature of the product.
Bridging finance, however, can be uniquely cost-effective when repaid promptly. Monthly interest is typically less than 0.5%.
As with all loans, there are additional fees and costs to factor in, when establishing affordability. All of which can and should be discussed with an independent broker, in order to help you find the best possible deal available.
Bridging Finance Borrowing Costs
Fees and commissions differ significantly from one product and lender to the next. Again, this is something that highlights the importance of working with an established and reputable broker.
With most bridging finance products, you can expect one or more of the following additional costs to apply although many can be added to the loan and are not payable in advance:
- Arrangement Fees
This is an initial admin fee charged by the lender, not the broker. Some brokers can charge their services for free, collecting commissions from the service provider, however, this can affect the impartiality of the broker and is also becoming far less common due to the other costs now associated with being a broker, so more and more brokers are now charging for their service. A typical lenders arrangement fee on a bridging product will usually be around 2%, though can be 1% or even 0% in some instances. Lenders that minimise the upfront costs of bridging finance can look preferable to more traditional lenders however the interest rate charged is usually higher so the overall cost can often work out more.
- Valuation Fees
Valuation fees are often unavoidable as it will be necessary for a formal valuation of your asset (i.e., your property) to be carried out before lending is agreed. This enables the lender to confirm that your asset is of sufficient value to cover the loan amount, though mostly the cost of the valuation is paid by the applicant, not the lender. Minimising valuation fees is another area in which an established broker can help as this will keep the costs as low as possible.
- Exit Fees
Some lenders impose flat-rate exit fees that are payable at the time of repayment. When you repay the balance of your bridging loan, you could be charged anything from 0% to 2% as an agreed exit fee. Many lenders also impose elevated exit fees for those who decide to repay their loans early to minimise interest. Exit fees and early repayment fees should be carefully considered and discussed with your broker, before applying for bridging finance.
- Legal Fees
Should it be necessary to seek the advice or support of a solicitor (either on your part or by the lender), you will be liable for meeting the costs accordingly. Depending on the nature of the loan and the lender used, legal fees can vary from 0% to 2% of the total loan amount, though are often charged as a flat rate by the solicitor.
Counting the Cost Before Applying
If you plan on applying for a bridging loan for any purpose, we strongly suggest assessing affordability with our bridging loan calculator beforehand. After which, we can conduct a whole-market search on your behalf, in order to ensure you find your perfect bridging product from a reputable and responsible provider.