Bridge Loan Calculator
A bridge loan calculator is an automated tool that helps users determine the financial implications of taking out a bridge loan. Bridge loans are short-term financing options used to "bridge" the gap between the purchase of a new property and the sale of an existing one. By entering information about the loan amount, interest rate, and loan term, users can estimate their monthly payments, total interest costs, and amortization schedule.
- Traditional Bridge Loan: Used to finance the purchase of a new property before selling an existing one
- Construction-to-Permanent Bridge Loan: Combines construction financing with permanent financing
- Commercial Bridge Loan: Used for commercial real estate transactions
Traditional Bridge Loan: Paying Back a Fixed Amount Periodically
Use this calculator for basic calculations of bridge loans, or click the links for more detail on each.
Construction-to-Permanent Bridge Loan: Paying Back a Lump Sum Due at Loan Maturity
Commercial Bridge Loan: Predetermined Amount Due at Loan Maturity
Use this calculator to compute the initial value of a commercial bridge loan based on a predetermined face value to be paid back at loan maturity.
Traditional Bridge Loan: Fixed Amount Paid Periodically
Traditional bridge loans are short-term financing options used to "bridge" the gap between the purchase of a new property and the sale of an existing one. Routine payments are made on principal and interest until the loan reaches maturity (is entirely paid off). Some common uses for traditional bridge loans include purchasing a new home before selling an existing one, funding home improvements, or covering temporary cash flow needs. Below are links to calculators related to loans that fall under this category, which can provide more information or allow specific calculations involving each type of loan.
| Home Bridge Loan Calculator | Real Estate Bridge Loan Calculator |
| Short-Term Bridge Loan Calculator | Property Bridge Loan Calculator |
| Bridge Financing Calculator | Interim Financing Calculator |
Construction-to-Permanent Bridge Loan: Single Lump Sum Due at Loan Maturity
Construction-to-permanent bridge loans combine construction financing with permanent financing. Unlike the first calculation, which is amortized with payments spread uniformly over their lifetimes, these loans have a single, large lump sum due at maturity. Some loans can also have smaller routine payments during their lifetimes, but this calculation only works for loans with a single payment of all principal and interest due at maturity.
Commercial Bridge Loan: Predetermined Lump Sum Paid at Loan Maturity
Commercial bridge loans are used for commercial real estate transactions. The face, or par value of a commercial bridge loan, is the amount paid by the borrower when the loan matures. Commercial bridge loans are typically structured as zero-coupon loans where borrowers receive funds at a discount to their face value, then pay the face value when the loan matures.
Bridge Loan Basics for Borrowers
Interest Rate
Bridge loan interest rates are typically higher than traditional mortgage rates due to their short-term nature and higher risk profile. Interest rate is the percentage of a loan paid by borrowers to lenders. For most bridge loans, interest is paid in addition to principal repayment. Bridge loan interest is usually expressed in APR, or annual percentage rate, which includes both interest and fees.
Compounding Frequency
Compound interest is interest that is earned not only on the initial principal but also on accumulated interest from previous periods. Generally, the more frequently compounding occurs, the higher the total amount due on the loan. In most bridge loans, compounding occurs monthly.
Loan Term
A bridge loan term is typically short, ranging from 6 months to 3 years. The term of the loan can affect the structure of the loan in many ways. Generally, the longer the term, the more interest will be accrued over time, raising the total cost of the loan for borrowers, but reducing the periodic payments.
Types of Bridge Loans
There are several types of bridge loans available to borrowers.
Traditional Bridge Loans
Traditional bridge loans are used to finance the purchase of a new property before selling an existing one. These loans typically feature shorter terms (6-24 months) and higher interest rates than traditional mortgages because they are considered higher risk. Traditional bridge loans generally have a higher chance of approval for borrowers with strong credit and significant equity in their existing property.
Construction-to-Permanent Bridge Loans
Construction-to-permanent bridge loans combine construction financing with permanent financing. These loans reduce the risk for borrowers by providing a single loan that covers both construction and permanent financing. Construction-to-permanent bridge loans typically feature terms that match the construction timeline plus a permanent financing period.
- Character—includes credit history, income stability, and financial statements
- Capacity—measures a borrower's ability to repay a loan using income and expense projections
- Capital—refers to the borrower's net worth and equity in existing properties
- Collateral—existing property or assets pledged as security for repayment of a loan
- Conditions—the current state of the real estate market and economic conditions
Construction-to-permanent bridge loans typically feature competitive interest rates and terms that match the construction timeline. Lenders may sometimes require a larger down payment (20-30%) for construction-to-permanent bridge loans.
If borrowers do not repay bridge loans, lenders may foreclose on the property. Bridge loans generally feature higher interest rates than traditional mortgages because they are short-term and higher risk.
Examples of bridge loans include home bridge loans, commercial bridge loans, and construction-to-permanent bridge loans.