How to read these examples
Every figure below is an illustration. Interest is shown as simple monthly interest unless stated, fees are rounded and valuation and legal costs are left out to keep the arithmetic clear. Real terms depend on the property, the valuation, your circumstances and each lender's own checks. The interest options are explained in bridging interest rates, and the gross loan and net advance in how much you can borrow.
Example 1: auction purchase refinanced onto a buy-to-let
An investor buys a flat at auction for £200,000. It needs a new kitchen before a buy-to-let lender will accept it.
- Gross loan at 70% of £200,000: £140,000
- Rate: 0.85% a month, interest retained for 12 months: £14,280
- Arrangement fee at 2%, added to the loan: £2,800
- Net advance on day one: £140,000 less £14,280 less £2,800 = £122,920
- Cash the investor needs for the price: £77,080, plus stamp duty, legal costs, valuation and the cost of the kitchen
The kitchen is fitted and the flat is refinanced onto a buy-to-let mortgage after 7 months. Interest used is £8,330. If the lender refunds the unused 5 months of retained interest, the refund is £5,950. Finance cost for the bridge: £8,330 interest plus the £2,800 fee, about £11,130, before valuation and legal fees. See auction finance and bridge to let.
Example 2: chain break on a new home (regulated)
A couple are buying a £600,000 home before selling their current home, worth £450,000 with no mortgage. They have £240,000 in savings. The bridge is secured on both properties, and because they will live in the new home, it is a regulated mortgage contract.
- Loan: £430,000, about 41% of the combined value of £1,050,000
- Arrangement fee at 2%: £8,600, deducted from the loan, so the net advance is £421,400
- Rate: 0.65% a month, rolled up, compounding monthly
- Interest over 6 months: about £17,045
- Repaid from their sale after 6 months: about £447,045
The net advance plus £178,600 of their savings covers the price. The rest of their savings, about £61,400, has to cover stamp duty and costs. Because they still own their current home on completion, the higher rates of stamp duty apply at first, and in England the extra can be reclaimed if the old home is sold within three years. If the sale took 9 months instead, rolled-up interest would rise to roughly £25,800. That is why realistic pricing of the sale, and a term with room to spare, matter. See chain break bridging.
Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Example 3: refurbishment with works funding, then sale
A developer buys a tired house for £250,000, plans £60,000 of works and expects to sell for £375,000.
- Day-one advance at 70% of the price: £175,000
- Works funding: £60,000, released in four stages of £15,000 in months 2 to 5, in arrears, after each stage is checked
- Total facility: £235,000, about 63% of the expected end value
- Arrangement fee at 2% of the facility: £4,700, added to the loan
- Rate: 0.95% a month, rolled up and charged only on what has been drawn
- Interest over 12 months, simple basis: about £19,950 on the day-one advance plus about £4,845 on the works releases, about £24,800
- Repaid at sale after 12 months: about £264,500
The developer's own cash is the £75,000 balance of the price, plus stamp duty, purchase costs and any works cost before each release. See refurbishment finance and light vs heavy refurbishment.
Example 4: second charge to raise cash, gross vs net
A landlord needs £100,000 in hand to pay a tax bill and cover works elsewhere. The investment property is worth £550,000 with a £250,000 buy-to-let mortgage that stays in place.
- Rate: 1.1% a month, interest retained for 9 months
- Arrangement fee: 2%
- To receive £100,000 net, the gross loan must be about £113,500, because retained interest of about £11,240 and a fee of about £2,270 come out of it
- Combined loan to value: (£250,000 + £113,500) ÷ £550,000, about 66%
This is the gross to net calculation in action: the headline loan is bigger than the cash received. If the landlord could pay interest monthly instead, at about £1,100 a month on a £100,000 loan, the gross loan would be much closer to the net figure. See second charge bridging and bridging for business purposes.
What the examples show
- Compare the net advance and total repayable, not just the rate
- Exiting early saves money where unused retained interest is refunded or interest is rolled
- Delays cost more each month on rolled-up interest
- Retained interest makes the gross loan larger than the cash you receive
- Works releases are paid in arrears, so you need cash to carry each stage
Run your own figures on our bridging calculator, then compare lenders that fit your deal on Instant Quotes and apply online.
Common questions
What is a typical bridging loan example?
A £140,000 bridge at 0.85% a month for 12 months, with interest retained and a 2% fee, gives a net advance of about £122,920. The figures are illustrative; real terms depend on the lender and your case.
How much would a £100,000 bridging loan cost?
At an illustrative 0.85% a month, interest is £850 a month. Over 6 months that is £5,100, plus a fee commonly around 2% and valuation and legal costs.
Why is the net advance lower than the loan?
Retained interest and any fees added to the loan are deducted from the gross loan, so the cash you receive is lower than the headline amount.
Are these real lender quotes?
No. They are worked illustrations using rates within the range shown by lenders on our panel. Instant Quotes shows indicative terms for your own deal.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
