Bridge Loan Calculator
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How to use this Bridge Loan calculator...
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.
$800,000 new home
-$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:
1) payment for both loans are made monthly
2) the bridge loan is an interest only loan (payments never go toward principal)
Join the conversation. Tell me what you think.
Robin says:
We are currently building a new home in another state but our first home has not sold. It is a larger home which tends to sell more in the spring season. The builders want us to close in December. We have over 300k in equity in this house and are planning to put down 160k for the down payment of the second. My husband and I are retired but my husband is still doing contract work. Would a bridge loan be a good option for us?
Karl says:
A bridge loan is certainly designed for this scenario. However, I’m not the one that should be answering the question. Interest rates and laws, just to mention two variables, change from location to location. It is best to get local advice. That’s why I try to limit support to how a calculator is used.
Robin says:
I’m not quite sure what the calculator means by cash available. Is it asking if you have any extra cash to put down on the new home before closing or is it asking how much equity is in the old home?
Also, for the first mortgage blank, are they looking for the original mortgage agreement? House was originally purchased at 473k but we have 300 in equity at this point.
Karl says:
Good questions. I certainly need to update the documentation.
The "cash available" is any cash you might have that you want to put toward the new property. This is cash-on-hand (or perhaps extra cash, though I don’t know what that is ;-), not cash from the sale of another property.
The "first mortgage" is the new, primary mortgage amount on the property being purchased. It is called the "first mortgage" with the balloon loan being the second mortgage.
If this doesn’t clear this up, please let me know.
Jane says:
We are wanting to borrow about 130K to 150K to purchase a ranch style home while we sell our other house (in WV). We own two houses without mortgage except a 50K home equity on our residence property in Florida. I’m not sure seller will wait on our home to sell so we should pay cash. ——couple possible problems: the house we want to buy is just over a flood zone boundary and it will not be our primary residence (summer home). We have great credit in high 700’s and enough money in IRA to do this 4x. BUT hubby does not want to withdraw IRA money because of taxes.
Karl says:
Sounds as if you might have to do some juggling. Is there a question here that I might be missing?
Kayla Parsons says:
The house we own now is paid in full and is valued at 121,000 and we have it listed for 106,900 figured it would be a quick sale but that hasn’t happened . We found a double wide and some land for 40,000 we want. Both houses r in wv . What do I need to do first with doing a bridge loan and how much will the payments be on the bridge loan .
Karl says:
It’s not clear to me that you need a bridge loan. Do you plan to have a mortgage on the new property after you’ve sold and settled on your current house? If not, then you don’t need what is considered, in a traditional sense, a bridge loan. A "Bridege Loan" is a 2nd loan or mortgage on the NEW property that will be paid off when the 1st property is sold.
If you plan to pay off the loan after the first property is sold, you can use this loan calculator.
M. May says:
You say can use this . . Please, use what instead of a bridge loan??
Karl says:
You can use "this", that is, this bridge loan calculator.
If you are paying off a 2nd loan on a new property after the first property is sold, then a bridge loan is appropriate.
Lets approach this in a different way, what do you need to accomplish?
Mary says:
I own a home in Florida, no mortgage, paid cash back in 2003. I want to buy a smaller home in Georga, however, to do so I would need a bridge loan. I plan on selling it but not yet, it is valued at $265,000. The idea is to get a bridge loan to purchase a condo in Georgia and pay it off when my house in Florida sells. Is there a specific amount of time that the bridge loan must be paid off?
Karl says:
The bridge loan is paid off when the house that is providing the security for the bridge loan is sold.
You could also look into getting a home equity line of credit on your first home to pay for the second home. It too would be paid off when the first home is sold. The HELOC loan is, in essence, a bridge loan.
Luke Allon says:
I am currently looking at a property to renovate. ill be buying it for £80,000. Ill spend about £20,000 on it and it should be worth around £130,000 when i’m finished. I don’t know how to use the calculator but im looking on getting a bridge loan to buy the property then hopefully pay back with in 6 months. Can you give me details on how much ill be able to loan and how much repayments will be.
Thankyou
Karl says:
Do you have another property? A bridge loan is for when you are buying one property and selling another property and you want to close on the property you want to buy before you sell the 2nd property. The 2nd property, the one you are selling provides the collateral for the bridge loan.
If the 20,000 is for renovations, then it sounds to me as if you need to borrow the full 80,000, unless you have other cash or collateral that you did not mention.
Mike says:
My wife and I did a bridge loan to buy our new home. The home we were selling had over $50,000 in equity based on the appraisal and the amount of money we had paid since owning the home over the course of 6 years. However, the real estate market tanked and we lost every bit of equity in the home we were selling due to it being a “buyer’s market” and getting low ball offers. We were advised to “stop the bleeding” and sell before we lost anymore money. That’s what we did. After paying the real estate agent her commission, the closing fees, and prorated taxes, we basically just broke even. Now, here is the issue: We are getting ready to close on our new home and do not have the 20% down payment anymore due to having to sell our home for less than what we bought if for 6 years ago. For the last 6 months, we have been making interest only payments on our new home, while also making the regular house payment on the home we were trying to sell. We used a great deal of our savings to be able to do both. We are soon to be in the process of closing on our new home, but not sure how it’s all going to work out without having the 20% down payment. The banker says we can do a second loan for 5% down vs. the 20% (we hate the idea of having 2 payments on the same house). I also have money in a deferred comp account that I can borrow against, but that also gives us another payment to make because I would have to pay that back as well. Plus, now that we do not have the 20% down payment, we will have a heightened payment due to the PMI. So, at this point, my wife and I are not sure that staying in our new home is even affordable at this point. We will have a very large house payment, a possible second payment for the 5%, and then PMI on top of that. Clearly, this did not work out as planned. I know that was a lot of information to take in, but do you have any advice? Should we sell the new home? Are there any other options for us? We have excellent credit and I am about to retire with a nice pension, but we don’t want to be “house poor.” Another question: will the interest payments we have made for the last 6 months on the new home go toward any of our new home debt or was that just money thrown out the window? We are quite disappointed at this point in the game and desperately need advice. Thank you for your assistance. Mike
Karl says:
I’m sorry, but I’m not a lawyer nor a financial planner. I limit the questions I will answer to "what calculator should I use?", "how do I use a particular feature?", or "what does a result mean?".
One question I can answer:
"Another question: will the interest payments we have made for the last 6 months on the new home go toward any of our new home debt?"
An interest only payment does not reduce the principal loan balance due. The interest is the cost one pays to borrow money. Sorry I have to tell you that. I know it’s not what you want to hear.
Tom Pham says:
Which market are you in Mike? That’s unfortunate and wish you the best.
Cindy says:
Once the second house sells does the higher interest rate on the final mortgage drop to a lower, more standard rate?
Karl says:
I would expect the bridge loan to have a slightly higher interest rate. The bridge loan is paid off when the house is sold.
The interest rate for the mortgage on the new home would stay the same unless the term of the loan dictates something else.
Joyce says:
We own our home free from any debt. We are selling and have another house under contract. Would it be wise to do a bridge loan in the process of waiting for our house to sell? Our house we currently live in will sell for more than the house we have under contract.
Karl says:
Hi Joyce, I limit the types of questions I answer on this site to those that ask how to use a calculator or feature; or what calculator to use for a particular type of question. I’m not a financial planner or adviser. Additionally, I don’t know the user’s particular financial situation, so it’s not appropriate for me to make recommendations.
Hope you understand.
Bodie Gentry says:
Why is your amount for bridge loans cut off at $30,000? My understanding is that I can get a bridge loan to buy condo, secured by my paid-off home of which I am told $175,000 will sell quickly. I am up in years and need to get moved while I can; but can’s sell without place to go—no place to go until I have money to buy it. How on earth do you think $30,000 or $50,000 would be a bridge? Also, rates go up from 3.5, current, up to 8—and why set for 24 months—not just the 6 months I read—or even 2 months if one wants it that way? Everything seems to be such a rip-off these days. I have no place to even lay my head if I were to put everything in storage while trying to find a place after selling. Condos are not coming available quickly and new ones are being built for younger 40ish folk with ceilings too high and too much sq. ft. for older to care for in latter years; thus reason for down-sizing; but clearly builders do not understand this. Thanks for listening, I have been trying to get moved for several years; but government is not loaning to elderly even with 833 credit score and no debt—trying to put healthy elderly into hi-rise infernos which cost $3,000 to $5.000 a month—not many elderly people can do that and thus are being forced into our graves. No one bears another’s burdens these days.
Karl says:
Hello, none of the limitations you mention are accurate. Please click on the "Help" button for the instructions on how to use this calculator. If, after reading them, if you have a question, please ask. The calculated "bridge loan amount" is the amount you need to close the deal on the 2nd home, given your current cash available and the purchase price. You are always free to borrow more. In that case, use the loan calculator on this site to create the schedule for what you want to borrow. Hope this gets you started.
Rich says:
Hi Karl,
Nice calculator. We may be building a bridge loan website. Is this calculator available for use on a site?
What would you charge for that?
Rich
Karl says:
Thank you Rich. At this time, the calculator is not available for use on another site. Can you link to it?
Troy says:
The house we want to purchase is $215000,the house we currently have is valued at $365000 we owe $225000. How does each of these numbers fit in the calculator?
Karl says:
A bridge loan calculator doesn’t consider the value of your current home. The purpose of the calculator is to tell you when purchasing the new home if a bridge loan is needed. You have approximately $145,000 equity in your current home (365,000 – 225,000). If you need a bridge loan, the equity can potentially be a collateral source to secure the needed bridge loan. A credit card could potentially be the source of funds too. Funds do not need to be secured by your current property.
Cody says:
my wife and I are selling our home for $370,000 and purchasing a home for $447,000. We are going to make about $154,000 on the sale of our first house. We plan on using $120,000 as a down payment for the new purchase. We had everything lined up to close on both the purchase and the sale on the same day, however, our buyer is having finance issue which is causing us to delay the purchase. To get our new home, would a bridge loan be a good idea to get the $120,000 for the down payment of the new home? My current mortgage payment is $1400 FYI.
Karl says:
Yes, a bridge loan would be appropriate. The calculator will tell you the size of loan that you need.
Tiffany says:
I don’t understand how a bridge loan works fully. I’ll post my understanding/questions below and maybe you can clear it up as I can’t find any answers as of yet.
We have a current mortgage that’s only 2 years old so we don’t really have an equity in it other than the upgrades we’ve made to it. While it hasn’t been appraised yet, I’m estimating maybe 15,000-20,000 value in upgrades. So if the house appraises higher now than what we purchased it for, the difference is considered equity correct?
Second and biggest question: Say we take out a bridge loan to cover remaining (98%) of previous mortgage plus a down payment for new house, what happens when the first house is sold? Do we then take out a mortgage on the new house? I don’t really understand how a bridge loan is supposed to help you get into a house faster when all it’s really providing is a down payment. Do you actually have 3 loans to pay all at once (supposing the bridge loan requires payments as opposed to allowing nonpayment for a few months); 1 loan for old house, 1 loan for bridge, and 1 for full amount of new house. The first two being paid off by previous home being sold?
Signed: totally confused on transition from bridge to new mortgage.
Karl says:
Regarding "if the house appraises higher now than what we purchased it for, the difference is considered equity correct"? Almost, but not exactly. Equity is actually the difference between the appraised value and the principal balance (or remaining balance) of the mortgage (not what you purchased it for).
Let’s say your equity is $25,000.
Say you want to buy a new home from $300,000 and you need to put 20% down ($60,0000). If, besides the equity in your home, you have an additional $50,000 in cash and investments you are $10,000 short of the required 20% down. You would, therefore, not be able to buy the new house.
This is where the bridge loan comes in. Borrow $10,000 from the equity in the existing home and use that to make the $60,000 ($50,0000 cash + $10,000 bridge loan) cash down payment when you go to closing on the new home.
Then, when you sell the first home, the proceeds from the sale will be used to pay off the bridge loan. You’ll get to keep $15,000 cash from the sale because you’ve used $10,000 of the $25,000 equity for the down payment on house #2.
So, you are NOT taking out a bridge loan "to cover remaining (98%) of previous mortgage". That mortgage is paid off when the first house is sold.
The big question is, can you afford to make payments on all 3 loans at the same time?
Melissa Gash says:
We own our house outright. Current value $300,000. It is up for sale. We have a contingency contract on a new home for $396,000. We want to get a bridge loan to buy the new home so we don’t lose it. Is that a good idea?
Karl says:
Are you looking for cash for a down payment on the new home? You should be able to use the equity you have in your current home to raise the funds for the down payment. That’s what a bridge loan is.