How an interest-only bridging loan works
With an interest-only, or serviced, bridging loan you pay the interest every month and repay the loan itself in one go at the end, usually from the sale of a property or a refinance. Because nothing is added to the debt, the balance stays the same for the whole term.
The monthly payment is the loan balance multiplied by the monthly rate. UK bridging lenders usually quote a monthly rate, so a loan of £255,000 at 0.85% a month costs £2,167.50 a month. If your quote gives an annual rate, choose Year (nominal) to divide it by 12.
Fees added to the loan raise the payment
Arrangement fees are often added to the loan rather than paid up front. That increases the balance you pay interest on, so the monthly payment is a little higher. Choose Added to the loan or Paid separately to match your offer. Exit fees are paid at the end, and legal and valuation costs are usually paid when the loan starts.
Worked example: £250,000 for 12 months
You need £250,000 for 12 months at 0.85% a month. A 2% arrangement fee of £5,000 is added to the loan, so the balance is £255,000. The monthly interest payment is £2,167.50, total interest is £26,010.00 and the total cost of borrowing, including the fee, is £31,010.00. At exit you repay the £255,000 balance.
If the same loan rolled interest up and compounded it monthly, interest would be £27,261.09, so paying monthly saves £1,251.09. If you paid the arrangement fee separately instead, the monthly payment would be £2,125.00.
Serviced or rolled-up interest?
Servicing interest costs less because interest is never charged on interest, and it can let you borrow more against the property because the lender does not need to hold back interest. But the lender will want to see that you can afford the payments every month, from income or savings. Rolled-up and retained interest need no monthly payments, which is why many bridging borrowers choose them.
To compare serviced, retained, rolled-up and deferred interest side by side, use the UK bridging finance calculator .
If you might repay part-way through a month, use the UK daily interest bridging loan calculator .
Use the right country page
This page stays in pounds and uses UK terms: bridging finance, a monthly rate and an arrangement fee. The country choices above the inputs open separate local pages. Choosing United States opens the US interest only bridge loan calculator, which uses an annual rate and origination points. The inputs reset and amounts are not converted.
Inputs for the interest only bridging loan calculator
Amount you need
The cash you need to receive. A fee added to the loan is on top of this.
Quoted interest rate
The rate in your offer, not the APR. UK bridging rates are usually quoted per month.
Rate quoted per
Month for a monthly rate. Year (nominal) divides by 12; Year (effective) converts to the equivalent monthly rate.
Term
Whole months you expect to keep the loan before repaying it.
Arrangement fee
The percentage in your quote. Choose below whether it is based on the cash you receive or the gross loan.
Exit fee
A percentage paid when you repay. Enter zero if your quote has none.
Arrangement fee payment
Added to the loan raises the balance you pay interest on; Paid separately does not.
Other quoted costs
Legal, valuation or broker costs paid at the start, if you want them in the total cost.
CALCULATOR QUESTIONS
UK interest only bridging loan calculator questions
How do you work out interest-only bridging loan payments?
Multiply the loan balance by the monthly rate. £255,000 at 0.85% a month is £2,167.50 a month.
Do I repay any of the loan each month?
No. On an interest-only bridging loan you only pay interest each month and repay the whole balance at exit.
Is serviced interest cheaper than rolled-up interest?
Yes. Rolled-up interest is usually compounded monthly, so you pay interest on interest. Serviced interest avoids that, but you need to make the payments every month.
Why is my payment higher than the amount times the rate?
Usually because a fee has been added to the loan, which increases the balance that interest is charged on.
What happens when I change country?
The United States option opens the separate US interest only bridge loan page, in dollars, with an annual rate. Your inputs are reset rather than converted.