Transitional Bridge Financing: LTV Calculations & Carrying Costs
A bridge loan (swing loan) is a short-term financing tool (typically 6 to 12 months) designed to help homeowners purchase a new home before their current home sells by leveraging the equity locked in their existing property.
Maximum Bridge Loan Borrowing Equation
Max Bridge Amount = (Current Home Appraised Value × Max LTV Cap) - Existing Mortgage Balance
*Most institutional bridge lenders enforce a maximum cumulative Loan-to-Value (CLTV) limit between 75% and 80%.
Interest-Only Carrying Costs Case Study
Property: $500,000 value with a $250,000 primary mortgage at 80% maximum CLTV.
- Max Combined Lending Limit: $500,000 × 0.80 = $400,000
- Net Bridge Proceeds Available: $400,000 - $250,000 = $150,000
- Monthly Interest at 9.0% APR: ($150,000 × 0.09) ÷ 12 = $1,125.00 / month
