How Does Bridge Loan Calculator Work

Trying to navigate the property market can prove to be a complex journey, and this is especially true when you’re trying to buy a new home before selling the one you currently reside in. That’s when a bridging loan comes into play. It offers a financial bridge that covers this gap. It’s important to understand the term, how it’s calculated and which tools you can utilise so that the entire process can become manageable.

At Kaleido, we strive to offer you the most up-to-date information that can help you with financial planning. Our main goal is to provide you with the appropriate guidance that you need to make a well-informed decision in all property transactions. It doesn’t matter if you’re buying your first home, or you’re an experienced buyer, our comprehensive insights are sure to help you navigate the complex financial market with ease. 

Bridging Loan Term

Bridging finance or a bridging home loan is a short-term loan designed to help in financing your purchase of a new property while you’re in the process of selling your current one. The bridging loan balance covers any gap between the sale of an existing property and the purchase of a new one. This loan unlocks funds that you need to secure your new home, since you’re currently in the process of selling the old home. Keep in mind that managing repayments is important for the old mortgage and the new bridging loan. 

How to Calculate the Bridging Loan Amount?

Getting an accurate calculation involves a couple of steps and considerations. This type of loan is designed to cover the gap between your old and new property so here’s a simple-to-follow, step-by-step guide that should help you determine the amount you need:

1. Estimate the Purchase Price of the New Property: This is the first thing you should do. If you don’t know the exact value, give your best guess since you need to know how much you are going to spend on a new property.
2. Calculate the Outstanding Mortgage Before You Sell Your Existing Property: Check and see what is your current home mortgage balance.
3. Estimate the Sale Price of the Existing Property: Get a valuation or consult with a real estate agent who should be able to estimate your current property value.
4. Subtract the Outstanding Mortgage from the Estimated Sale Price: This way you calculate equity once you sell your property.
5. Calculate the Total Loan Required: The final step is the calculation where you take the new property prices, and you deduct the current home equity value from it.

Here’s a simple example you can use. If for example, the new property value is $700,000, the current home mortgage is $300,000 and you are expected to sell it for $500,000, your calculation would look like this:

• New Property Purchase Price: $700,000
• Estimated Equity from Sale: $500,000 – $300,000 = $200,000
• Bridging Loan Amount: $700,000 – $200,000 = $500,000

Bridging Loan Calculator Australia

Australians use a bridging loan to bridge the gap between buying a new home and selling the old one. That’s why most Australians use dedicated calculators that offer price insight because they take market conditions and regulations into account. Here are a few reasons why you should also use one: 

1. Input Variables: A well-rounded calculator should require a few important pieces of information such as the purchase price of your new property, current mortgage, and the interest rate.
2. Instant Calculations: This calculator should give you all the required information as soon as you put it in. It should give you accurate data for bridge loan amounts, repayment schedules and interest costs. 
3. Scenario Comparison: A few calculators are a bit more complex but allow you to compare different scenarios such as different or varying interest rates or unforeseen changes in the property prices.
4. Local Market Adaptations: A calculator made for the Australian marketplace should be able to consider local market trends, financial regulations and legal requirements thus offering a much more accurate and relevant result.

How Much Can I Borrow from a Bridge Loan?

If you’re looking to see how much you can borrow with a bridge loan, there are a few important factors you need to take into consideration:

1. Equity in Your Existing Property: We mentioned equity before and how it’s calculated, but the short explanation is that the more equity you have, the more you can potentially borrow.
2. Lender Policies: There is a myriad of different lenders to choose from and each has its own policies. Some lenders might offer up to 80% of the combined value from both properties (your new and your old property).
3. Income and Repayment Capacity: Some lenders might need to assess your current income and your overall ability to repay the loan. They might look into your current debts, income and expenses before they make a decision on how much you can borrow.
4. Credit Score: It’s important to have a good credit score because it increases your borrowing capacity. Most lenders will look at this number first and might even offer favourable terms for borrowers who have a strong credit history.
5. Loan Term: How long your loan term is also influences how much you can borrow. This means that shorter terms might have higher repayments, but overall they should have less interest.

It’s also significant to sell your current property within the agreed-upon timeframe before you buy your next property on time. Feel free to reach out and ask for assistance. At Kaleido, we offer dedicated support and we promise to help you find a favourable maximum loan size for you at very favourable terms. 

What Are the Monthly Repayments on a Bridging Loan?

When trying to understand monthly repayments for bridging loans, it’s important to know why proper financial planning for those repayments is important. Here are a few important things to keep in mind:

1. Interest Rate: Interest rates vary depending on the agreed-upon terms with your lender and bridging loan interest rate is usually lower. To get the exact rate you should talk to a professional lender.
2. Loan Amount: The total loan amount of the amount you’re borrowing. Higher loans often have a higher monthly repayment.
3. Loan Term: Most of the time bridging loans are short-term and can range between a few months to a few years. This means that you will tend to have a higher monthly repayment but a lower interest rate.
4. Repayment Type: Some loans only offer an interest-only repayment during the bridging period. This means that you only pay the interest on the bridging loan until you sell your home. 

You can use a calculator that can simplify this process. Let’s say that for example you borrow $500,000 at an interest of 5% for 12 months and you’re supposed to pay for your interest only. When you take out a bridging loan you’ll be able to calculate your monthly repayments like this: 

• Monthly Interest: (Loan Amount * Interest Rate) / 12
• Monthly Interest: ($500,000 * 0.05) / 12 = $2,083

This means that if for your loan you need to pay interest only, your repayment would be around $2,083. Of course, that means that if you need to pay both interest and principal, the amount will be higher. Please keep in mind that additional costs such as agent fees, loan to value, stamp duty and other expenses could all play an important role in how much your monthly repayment is. Please reach out to us at Kaleido in order to get the most accurate and up-to-date information on all loan types. We also offer a fast and easy online quote in minutes. Move confidently into your next chapter with the bridging loan to solve your problem. Avoiding additional fees and charges is our utmost priority and getting a loan approval as soon as possible is of our utmost importance.