# Bridge financing cost

Canonical: https://chicagocommercialfunding.com/tools/bridge-financing-cost/

Model interest, origination points, extensions and other loan costs.

## Model inputs and hypothetical defaults

- Fully funded principal ($): 1500000
- Annual interest rate (%): 10
- Total months including extension: 18
- Origination points (%): 2
- Extension fee (% of principal): 1
- Other loan costs ($): 15000

## How the model works

Cost = principal × rate × months ÷ 12 + origination fee + extension fee + other entered costs.

## Worked illustration

At $1.5 million, 10% annual interest and 18 months, interest is $225,000. Add $30,000 origination, $15,000 extension and $15,000 other costs for $285,000 total.

## Use the actual funded-balance convention

This calculation charges simple interest on the fully funded principal for every modeled month. It suits an initial comparison when the whole principal is outstanding. A rehabilitation facility that advances money over time can have a different interest path. An undrawn commitment may also carry fees. Compare the note, draw agreement and quote before applying this total to a real transaction.

Include an extension fee only when that is the scenario being tested. The months input includes the entire assumed period, including an extension; adding extension months twice overstates interest. Conversely, a fee does not establish that an extension is available. Actual extension rights may depend on notices, payment, occupancy, debt coverage, hedging or other conditions.

## Compare execution and maturity as well as cost

The output is a dollar cost over the entered period, rather than an APR or investment return. Two loans can have similar total cost but very different cash timing, required reserves, guarantees or payoff charges. Ask which fees are paid at closing, withheld from proceeds, financed, or paid later. Financed fees change the balance and require a separate schedule.

Increase the holding period to model delayed stabilization. Then examine the takeout using supportable income, value and remaining capital. Lower monthly payments do not solve a maturity problem. A bridge is most useful when its funded business plan and exit remain credible under delay and a weaker permanent-debt market; the calculator cannot establish that credibility.

## Limitations

Fully funded interest-only model. Actual draw balances, minimum interest, default rates and exit fees require separate inputs.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf)
- [Build an executable permanent exit](https://chicagocommercialfunding.com/guides/bridge-to-permanent-financing-and-exit-underwriting/)
- [Separate commitments, balances and reserves](https://chicagocommercialfunding.com/guides/interest-reserves-lender-holdbacks-and-funded-loan-balances/)