Why bridge loans are refinanced
A bridge loan is short-term financing, often with a rate several points above a standard mortgage. Many borrowers pay it off by refinancing into a permanent mortgage once the old home has sold, the renovation is done or the property has been rented and appraised. The new lender appraises the property and lends up to a maximum loan to value, so the bridge payoff has to fit within that limit.
The calculator treats the new loan as a fully amortizing mortgage over the term you choose, with the annual rate divided by 12 each month. Check the loan to value first: if the payoff is above the lender's limit, the shortfall is extra cash you would need at closing.
Points, closing costs and prepayment fees
Refinancing costs money. You may pay origination points on the new loan, closing costs such as appraisal and title fees, and sometimes a prepayment fee to the bridge lender. This calculator adds them as the one-off costs and divides them by the monthly interest you save to show the break-even point.
Worked example: refinancing a $400,000 bridge loan
You owe a $400,000 payoff on a bridge loan at 10% a year, secured on a property appraised at $650,000. A 30-year mortgage at 6.75% repays it, giving a monthly payment of $2,594.39 and a loan to value of 61.5%, within an 80% limit.
The bridge costs $3,333.33 a month in interest, while the first month of mortgage interest is $2,250.00, so you save $1,083.33 a month. The one-off costs are $8,000.00: 1 point on the new loan, which is $4,000, plus $4,000 in closing costs. They are recovered in 7.4 months.
What this comparison leaves out
The monthly payment includes principal, so it is not directly comparable with the bridge's interest. The saving shown compares interest only. Lenders also check your income and debt-to-income ratio, which can limit what you can borrow regardless of the property value. Ask your lender for a Loan Estimate for the exact costs.
To work out the cost of the bridge itself, use the US swing loan calculator .
If you pay interest only on the bridge, use the US interest only bridge loan calculator .
Use the right country page
This page stays in US dollars and uses US terms: refinance, points and closing costs. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK remortgage after bridging loan calculator, which uses a monthly bridging rate and an arrangement fee. The inputs reset and amounts are not converted.
Inputs for the refinancing a bridge loan calculator
Bridge loan payoff
What you owe on the bridge when the new mortgage closes, including any deferred interest.
Property value
The new lender's appraised value.
Bridge loan rate
The rate you pay on the bridge now, not the APR. US bridge loans are usually quoted per year.
Bridge rate quoted per
Year (nominal) divides by 12. Choose Month if your bridge rate is monthly.
New mortgage rate
The annual note rate on the new mortgage, not the APR.
New mortgage term
Years to repay the new mortgage in full.
Origination fee (points)
A percentage of the new loan, paid at closing and not added to the loan.
Bridge prepayment fee
A percentage of the payoff charged by the bridge lender. Enter zero if none.
Closing costs
Appraisal, title and other one-off costs of the new mortgage.
Lender's maximum loan to value
The most the new lender will lend, as a percentage of the appraised value.
CALCULATOR QUESTIONS
US refinancing a bridge loan calculator questions
How do you refinance a bridge loan?
Apply for a permanent mortgage. The lender appraises the property and lends up to its maximum loan to value, and the proceeds pay off the bridge at closing.
How do you work out the break-even point?
Divide the one-off costs by the monthly interest you save. In the worked example, $8,000 divided by $1,083.33 is 7.4 months.
What if my payoff is above the lender's limit?
The calculator shows the shortfall, which is the cash you would need to bring to closing or borrow elsewhere.
Why is the mortgage payment lower than the bridge interest?
Because the mortgage rate is lower and spread over many years. The payment also includes principal, so compare the interest saved too.
What happens when I change country?
The United Kingdom option opens the separate UK remortgage after bridging loan page, in pounds, with a monthly bridging rate. Your inputs are reset rather than converted.