How interest-only bridge loan payments work
Many US bridge loans, including swing loans used to buy a new home before selling the old one, charge interest only. You pay interest each month and repay the whole loan when the old home sells or the loan is refinanced, so the balance does not go down during the term.
The monthly payment is the loan balance times the annual rate divided by 12. A $300,000 bridge loan at 10% a year costs $2,500 a month in interest.
Points, closing costs and the loan balance
Bridge lenders usually charge origination points, a percentage of the loan, plus closing costs such as appraisal and title fees. Points are usually paid at closing. If your lender adds them to the loan instead, choose Added to the loan: the balance and the monthly payment both rise.
Worked example: a $300,000 six-month bridge loan
A $300,000 bridge loan at 10% a year for six months has a monthly interest-only payment of $2,500.00. Total interest is $15,000.00, and 2 points paid at closing cost $6,000.00, so the total cost of borrowing is $21,000.00. When the old home sells, the payoff is the $300,000 balance.
If the lender deferred interest and compounded it monthly until payoff, interest would be $15,315.99, so paying monthly saves $315.99.
Monthly payments or deferred interest?
Paying interest monthly costs less, but you need to afford it alongside your other housing costs, and lenders may count the payment when they assess your debt-to-income ratio. Some bridge loans defer interest to payoff instead, which avoids monthly payments but adds to the amount due at closing on the sale.
To compare interest-only, deferred and prepaid interest on a swing loan, use the US swing loan calculator .
For interest to the exact payoff day, use the US bridge loan per diem calculator .
Use the right country page
This page stays in US dollars and uses US terms: an annual rate, origination points and a payoff. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK interest only bridging loan calculator, which uses a monthly rate and an arrangement fee. The inputs reset and amounts are not converted.
Inputs for the interest only bridge loan calculator
Amount you need
The loan amount you need. Points added to the loan are on top of this.
Quoted interest rate
The note rate, not the APR. US bridge loans are usually quoted per year.
Rate quoted per
Year (nominal) divides by 12. Choose Month if your quote gives a monthly rate.
Term
Whole months until you expect to pay the loan off.
Origination fee (points)
One point is 1% of the loan. Choose below whether it is based on the cash you receive or the gross loan.
Exit fee
A percentage charged at payoff. Most US bridge loans have none.
Origination fee payment
Paid separately at closing, or added to the loan, which raises the payment.
Other quoted costs
Appraisal, title or other closing costs, if you want them in the total cost.
CALCULATOR QUESTIONS
US interest only bridge loan calculator questions
How do you calculate an interest-only bridge loan payment?
Multiply the loan balance by the annual rate and divide by 12. $300,000 at 10% is $2,500 a month.
Does an interest-only bridge loan reduce the balance?
No. You pay only interest each month and repay the full balance at payoff, usually from the sale of your old home.
Is it cheaper to pay interest monthly or defer it?
Paying monthly is cheaper when deferred interest compounds, because you avoid interest on interest. Deferring avoids monthly payments but raises the payoff.
Do points change my monthly payment?
Only if they are added to the loan. Points paid at closing add to your cost but not to the payment.
What happens when I change country?
The United Kingdom option opens the separate UK interest only bridging loan page, in pounds, with a monthly rate. Your inputs are reset rather than converted.