Bridge loan calculator
A bridge loan buys and fixes up a property until a long-term loan can take over. See what the bridge costs, the cash you need, and whether the refinance at the end will pay it off.
What this answers: What will this bridge loan cost, how much cash do I need, and will a long-term loan pay it off when the work is done?
Start from an example, then change any number:
The long-term loan should pay off the bridge: about $2,056,741 against a $2,010,000 payoff, leaving $46,741 for you. The bridge costs $381,000 in interest, points and fees, and the DSCR rule limits the new loan.
- Bridge payoff$2,010,000
- New long-term loan · DSCR limit$2,056,741
- Renovation paid in cash
- $0
- Interest over the term
- $301,000
- Your cash in before refinancing
- $781,000
- Cash left in after refinancing
- $734,259
- New loan's DSCR
- 1.25
- New loan-to-value
- 68.6%
How this is calculated
- 1Bridge loan = purchase price × the share financed + rehab budget × the share financed, capped at the after-repair value × the lender's maximum (if it has one). A cap cuts the rehab money first.
- 2Interest is interest-only, each month on what has been drawn: the purchase part from day one, the rehab part paid out evenly over the rehab months.
- 3Bridge cost = interest + points + exit fee + closing costs. Cash to close = down payment + points + closing costs.
- 4New long-term loan = the smallest loan allowed by the lender's DSCR, LTV and debt yield rules on the improved property's NOI and value (the same math as the commercial loan sizing calculator).
- 5Refinance gap = new loan − bridge payoff (balance + exit fee). Positive means cash back to you; negative means cash you'd have to bring.
Assumes the work finishes and the property is leased up by the end of the term, and that rates on the long-term loan are what you enter. Extension fees, default interest, interest reserves and the long-term loan's closing costs aren't included. Get term sheets from lenders before you commit.
Words to know
- Bridge loan
- A short loan, usually 6–36 months, to buy or improve a property until it qualifies for a long-term loan or sells.
- Interest-only
- Each payment covers only interest, so you still owe the whole loan at the end of the term.
- Points
- An up-front fee as a percentage of the loan. Two points on $1,000,000 is $20,000.
- Loan-to-cost (LTC)
- The loan as a share of what you're spending: purchase price plus rehab.
- After-repair value (ARV)
- What the property should be worth once the work is done and it's leased up. Bridge lenders often cap the loan at 65–75% of it.
- Draws
- Rehab money the lender pays out in stages as work is finished, instead of all at closing.
- Exit
- How the bridge gets paid off: usually a refinance into a long-term loan, or a sale.
- Stabilized NOI
- Yearly net operating income once the property is improved and leased at market rents. It's what the long-term lender sizes the new loan on.
Frequently asked questions
- How is a bridge loan different from a regular mortgage?
- It's short (often 6–36 months), usually interest-only, more expensive (higher rate plus points and fees), and sized on the deal and its after-repair value rather than today's income. The whole balance is due at the end.
- What happens if the refinance doesn't cover the bridge payoff?
- You'd have to bring the difference in cash, sell, or ask the bridge lender for an extension, which usually costs a fee. That's why the calculator compares the new loan with the payoff before you buy.
- Why does the rehab timeline change the interest?
- Rehab money is usually drawn in stages, and you only pay interest on what's been drawn. A slower rehab spreads the draws out but also uses more of the term before the property is ready to refinance.
- What term should I pick?
- Long enough to finish the work, lease the property and close the refinance, with a cushion. Construction and lease-up often take longer than planned, and extensions cost money.
- Can I use a bridge loan for a residential flip?
- Yes. Hard-money loans for flips work much the same way. For a flip you'd exit by selling, so the fix-and-flip calculator is a better fit.