YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR BRIDGING LOAN.
The bridging loan calculator will provide you with four figures:
Please note that there are other ways of paying your bridging finance which may alter the monthly and total amounts you need to repay.
The actual repayment amount may vary depending on a number of factors, such as how you choose to repay your interest. Ask our advisers for a personalised illustration.
Bridging is a very versatile way of securing short-term finance, and can be tailored to suit a variety of circumstances and property loans.
You can acquire a bridging loan on a first or second charge basis, open or closed and loans that come alongside (or even become) other products. But did you know that you can also choose how to pay the interest on your bridging loan?
Typical interest payable on a £100,000 bridge loan
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This table is an indication of some typical bridging loan interest rates. As no two bridging offers are the same, please view this as a representation of what the interest on a loan of £100,000 would typically cost, for the rates available today.*
The bridging loans we recommend are not regulated by the FCA.
*This does not include any of the fees associated with a bridging finance such as the valuation fee or any solicitor fees as these will vary from lender to lender.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR A LOAN SECURED AGAINST IT.
Most bridging loans are structured in such a manner that you will repay the interest on the loan each month, and then repay the full principal at the end of the loan.
This method of borrowing suits customers who will have a consistent, regular cash-flow, throughout the lifetime of the loan and will be able to service monthly payments without over-extending themselves.
However, it is also possible to pay off the interest alongside the principal of the loan, and even deduct some or all of the interest from the loan advance.
Rolled up interest on your bridging loan means that you will make no repayments during the lifetime of the loan; rather, you will repay the rolled interest upon the loan’s redemption.
The interest is usually compounded, which means that it will be calculated anew at the end of each loan period (usually a month).
So, whilst monthly payments reduce the outstanding balance each month and are therefore the same, repayments accrued under compound interest actually become a little larger.
To give an example: repayments on a 12 month, £100,000 loan with interest charged at 0.75% will be £750 per month. The full cost of the loan at redemption will be £109,000.
With compound interest, the first payment will be £750, the second £755.63 (0.75% of £100,750), and so on. The cost of this loan paid with rolling interest will be £109,380.69.
This example only costs an average of £32 per month more than the non-rolling loan, but rolling the interest at higher interest rates, on larger loans or for longer terms can really add up.
The flip-side is the ability to make full use of the loan without having to worry about monthly repayments, and for borrowers seeking smaller, shorter-term loans, rolling interest can be extremely useful.
Rather than pay rolled interest at the end of the bridging loan term or pay it off throughout in monthly instalments, you can also opt to deduct it from the principal at the start of the loan.
In the above example, for instance, you would deduct the £9,000 of regular interest repayments from the loan advance, meaning that you would only receive £93,000.
However, you would avoid compound interest and would be free of monthly repayments, giving you the flexibility needed to focus on your project.
Structuring a retained interest loan in this manner is particularly conducive to longer terms of up to 24 months.
It is also possible to combine serviced, rolled up or retained interest payment options.
For instance, you could deduct half of the interest from the advance of the loan and then roll the remainder to redemption.
You could even deduct half of the interest, roll a proportion of the remainder and then make regular repayments for the last two or three months, when the project is nearly finished.