Bridging Finance Loan Calculator Explained UK Property Investment - YouTube

so be good to understand how  to sort of you know assess  

bridging loan based financials and if your  spreadsheet helps with that that would be very  

kind all right okay the benefits of using bridging  is that uh it's it's quick you can buy stuff quick  

and it doesn't have to be mortgageable so if  you're looking for a refurbishment project that's  

uh that's what bridging is for they  know exactly what they're lending on  

unlike well mortgage lenders but i guess you  know the the benefits of of bridging by now and i  

i'm not a bridging lender so i'm just an  investor like yourselves i'm doing projects and i  

i found that well when it comes to bridging  there are certain costs and it's not  

always clear what is the actual total cost of  of taking out that loan and that was really  

the intention of of creating that well small  calculator i mean it's just a one pager but  

it gives you that well that certainty of well  this is the actual cost of that loan and can i get  

should i take out that loan or is it  more feasible to arrange finance from  

somewhere else and so that's what i built  for myself let me just share my my sheet  

so i'm just showing you if i was to use uh my  own sheet this is how i use it okay and then you  

you see what are the important uh points so i'm  calculating the the loan for a certain duration um  

because you have some fixed costs that you  have to pay regardless of how long the loan is  

and then you have your monthly interest so  that's why um i'm making the assumption of  

for example eight months that's how long i  need to stay on that bridging loan before i  

can replace it with a new mortgage your project  would be a bit more complicated and it needs  

time for some planning application then i would  say maybe write 12 months in here and just to be  

on the safe side but it sounds like you have  a very well straightforward one building an  

extension is not complicated very straightforward  so it sounds like you could do with an eight-month  

bridge so and by the way this is not financial  advice it's just how to use this sheet uh it's  

it's the four different percentages which you  most likely will get from a bridging lender it's  

just they're written everywhere and anywhere but  you you will come across those four percentages  

first is the the loan to value currently we see in  the markets that 75 is quite normal there are some  

lenders that do a little bit higher but then their  fees might be higher obviously you can always do  

less but around 75 that's that's what we see in  the market is reasonable yeah first starting point  

is your purchase price that's what they lend on  in a worse cases they say well it's our survey  

says it's only 160. maybe change lenders change  surveyors then the next column is arrangement fee  

that's basically they're covering that they get  a fee up front uh for just taking out the loan  

and that is anywhere between well half  a percent and three percent i've seen  

um i just take an average of of two percent that's  the most lenders are taking two percent obviously  

you would take your the offer that you have gotten  from uh from a bridging lender and then you see  

are they charging one percent one and a half two  two and a half uh what is it but two percent is  

roundabout right then in the next one at the  end when you repay the loan after eight months  

then they might charge you another exit fee and  that is again how many percent is that i have  

seen lenders that don't charge exit fees and we  also have used some so maybe here i would just say  

right now there is there are lenders plenty of  lenders that don't charge an exit fee they only  

charge you two percent upfront and you can  repay whenever you want without a penalty  

basically but then you go to a different lender  and they say well actually we charge one percent  

upfront at one percent when you redeem at  the end of the day it's the same amount  

it's just a different way of charging yeah and  then the interest rate um every month you get  

charge interest rate how much is it and we see  rates starting from half a percent per month um  

so that's obviously six percent a year up to one  and a quarter maybe even one and a half percent  

majority is maybe around one percent that's a safe  safe bet so that's 12 a year what they're charging  

so i would put that in um whatever you're  getting and then you have all sorts of  

other costs that are not a percentage it's just  a a one-off fee and yeah that is every every uh  

lender might call it a bit different and yeah  you can just change the name of this but i've  

well listed up six different ones that just  keep repeating in different like wording  

if you go through a broker you have to  pay the broker i for me i class that as a  

well that's the cost of arranging that  finance and therefore i include it here  

because i might as well just go directly to  the lender and then i don't have to pay the  

broker fee but am i getting the best deal then i  don't know because i only go to one lender yeah  

might cost you 499 depending on what broker  you use then a valuation fee some lenders just  

do a desktop valuation so they just log into  some portal and they get a valuation sometimes  

they need to send out someone so it depends on  what the property is so you can go from nothing  

up to i don't know a grand it's it's really it's  case by case let's just say they also charge  

499 so a physical evaluation can take place um an  asset manager i've seen that's floating around um  

doesn't happen too often so let's leave it for  at zero you need to take out some insurance  

uh they just charge you for it you pay legal fees  and that is not for your purchase but that's for  

the legal fees incurred by the bridging lender you  just have to pay every one solicitor yeah a grant  

is sort of what they charge yeah when you  pay back the loan it could be just like up  

here that you have an exit fee that is a  percentage of the loan or they just have  

a small admin fee which is more reasonable um  that small admin fee is more likely to happen  

uh than the percentage but i i would list it up as  that yeah and that's all that you have to consider  

for the costs i'm not saying this is everything  it just gives you a starting point where you now  

see that taking out this loan costs you probably  16 000 and if you calculate it just like a credit  

card company or well whoever loan car loan you  will get to an apr of around 18 and that is  

the headline figures is usually this this is what  a broker tells you what a lender tells you they  

say well it's one percent a month so it's 12 but  by the time you add in all the other fees that you  

have to pay to get that loan you're getting um to  way more keep in mind that this calculation does  

not take into account what they actually give you  on the first day because so there are some lenders  

that charge you the whole interest up front  and you have to pay all of these costs up front  

so instead of giving you those  so this is the 75 percent of 185  

they might give you this amount minus the 16  grand and just in case you repay the loan earlier  

then you get some interest back so that can also  be an option so for me when i'm doing a deal then  

i just put those 16 grand aside because i know  i will use it just not all at the beginning but  

i pay the interest and serve that and i might  have some redemption fees but you need to be  

aware of all those costs with buying properties  in cash uh how many more properties can you buy  

before you run out probably fairly quickly so  there's a lender giving you money it just costs 18  

and it's your job to make uh that profit back  so i've always shied away from from it because  

it just feels like an unknown territory  for me but you know would you say  

actually it's not an unreasonable path it helped  me building my portfolio quite quickly because i  

need less money to buy a property yeah and  i can buy more properties at the same time  

the only thing i have to look out for is  am i accounting for those costs am i buying  

at the right price and am i then adding  enough value so it justifies those costs