Bridge Loan Calculator 🌉

Calculate the cost of short-term **interest-only financing**, including the required monthly payment, total interest, and final balloon payment.

Bridge Loan Parameters

Key Features of This Calculator

**Interest-Only Payments:** Calculates the fixed monthly payment where no principal is paid down.
**Balloon Payment:** Clearly shows the large principal repayment due at the end of the short term.
**Full Cost Analysis:** Includes origination fees and closing costs to determine the total borrowing expense.

The Bridge Loan Calculation Method

Bridge loans are generally calculated using simple, interest-only payments, with the full principal due as a final balloon payment.

1. Monthly Interest-Only Payment ($M$)

Calculated based on the full principal, the annual rate, and paid monthly.

M = Principal × (Annual Rate % / 12)

2. Total Fees ($Fee_{Total}$)

Fee_{Total} = (Principal × Origination Fee %) + Other Closing Costs

3. Balloon Payment ($B$)

Since the payments are interest-only, the final payment is the full principal amount.

B = Principal

What is a Bridge Loan?

A **bridge loan** is a type of short-term financing used to "bridge" a gap between two transactions, typically lasting from six months to two years. They are most common in real estate, allowing a buyer to purchase a new home before selling their current one, or for investors to quickly secure a property before obtaining long-term financing.

Key Characteristics (H4 for loan features)

**Short Term:** Rarely last longer than 12-24 months.
**High Rate:** Interest rates are typically higher than conventional loans due to the short term and associated risk.
**Interest-Only:** Payments during the term usually cover only the interest, meaning the principal remains unchanged.
**Balloon Payment:** The entire principal is due in one lump sum at the end of the term.
**Low Fees:** Upfront origination fees (often referred to as 'points') and closing costs can significantly increase the total cost of the loan.

Bridge Loan Risks (H4 for risk factors)

The biggest risk is the failure of the "exit strategy" – the expected event that repays the loan. If a home sale is delayed or a refinance falls through, the borrower is left with a large balloon payment due and may face foreclosure or significant penalties.