The components of cost
- Interest: quoted per month and charged for the months the loan is outstanding, often with a minimum period
- Arrangement fee: commonly 1% to 2% of the gross loan, usually added to the loan
- Exit fee: charged by some lenders on repayment, often a percentage of the loan; many charge none
- Valuation fee: paid upfront to the lender's panel surveyor, varying with property value and type
- Legal fees: your solicitor's and the lender's solicitor's, both normally paid by you
- Broker fee: where one applies, disclosed to you before you proceed
Our guide to bridging loan fees covers when each fee is paid, and bridging interest rates explains how interest is calculated.
A worked example
Take an illustrative £300,000 bridge for 9 months at 0.8% a month, with a 2% arrangement fee and no exit fee, interest retained.
- Interest: £300,000 × 0.8% × 9 = £21,600
- Arrangement fee: £6,000
- Valuation, say: £1,500
- Legal fees for both sides, say: £4,000
- Total cost: about £33,100
That is around 11% of the loan for nine months, or roughly £3,700 a month all in. If the property sold after six months and unused retained interest were refunded, the interest would fall to £14,400 and the total to about £25,900. These figures are for illustration only: real costs depend on the lender, the property and your circumstances.
What makes a bridge cheaper or dearer
Lenders price for risk. The main factors are:
- Loan to value: lower borrowing usually attracts lower rates; many lenders price in tiers
- Property type: standard residential is usually cheapest; land, commercial and specialist property cost more
- Charge: second charges cost more than first charges
- Works: heavy refurbishment costs more than a simple purchase
- Credit and experience: adverse credit or a first project can add to the price
- Loan size: very small loans can carry minimum fees that make them proportionally dearer
- Regulation: regulated bridging has a smaller lender pool
Ways to reduce the total
- Borrow less, where you can, to move into a lower pricing tier
- Choose a realistic term with headroom, rather than paying for an extension later
- Ask whether unused retained interest is refunded on early repayment
- Compare fees and rates together, not the rate alone; see bridging costs explained
- Have documents ready to avoid paying for delays, such as a second valuation
- Use a solicitor experienced in bridging to keep legal costs and timing under control
Comparing like for like
Two quotes with different rates, fees and interest treatments can only be compared by working out the total repayable over the term you expect, and the net advance you receive on day one. A lower rate with a larger fee can cost more on a short loan, and a retained-interest loan leaves you with less cash than a serviced one.
Instant Quotes shows indicative terms for lenders on our panel side by side so you can see these differences. Quotes are not offers, and final terms depend on each lender's valuation and checks.
Common questions
What is a typical bridging loan interest rate?
Monthly rates commonly sit somewhere between about 0.5% and 1.5%, depending on loan to value, property, credit and complexity.
Are bridging fees added to the loan?
The arrangement fee is usually added to the loan. Valuation fees are normally paid upfront, and legal fees are paid on or before completion.
Is a bridging loan cheaper if I repay early?
Often, yes. Interest is usually charged only for the months used, subject to any minimum period, and unused retained interest is commonly refunded.
How do I compare bridging quotes?
Compare the total repayable over your expected term and the net advance on day one, not just the headline monthly rate.
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.
