Net Loans Vs Gross Loans for Bridging Loans
Net loans and gross loans are two phrases used to describe two different aspects of the bridging loan. The difference between net loans and gross loans comes down to the underlying interest rate and fees associated with the loan.
What is the Net Loan?
A net loan is a loan that has been calculated on the total loan-to-value (LTV) ratio of the loan. The net loan amount is the actual amount of the loan that is made available to the borrower after all fees and interest have been deducted. Net loan payments will always be lower than gross loan payments as fees and interest have already been paid.
What is the Gross Loan?
A gross loan is a loan that has been calculated on the total loan-to-value (LTV) ratio before any of the fees or interest have been added. The gross loan amount is the full amount of the loan that is made available to the borrower before any fees or interest are deducted. Gross loan payments will always be more than net loan payments as interest and fees have yet to be paid.
Final thoughts
In short, a net loan is a loan that has been calculated on the total LTV after all fees and interest have been deducted. A gross loan is calculated on the total LTV before any of the fees or interest have been added.
When it comes to bridging loans, the difference between net loans and gross loans is significant, as the fees and interest can be high in a bridging loan.
By understanding the difference between net loans and gross loans, you can make a more informed decision when selecting a bridging loan option that is suitable for you.
