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)