Bridging loan costs explained

The cost of bridging finance comes down to one rate and four fees. For most deals, indicative monthly interest runs from 0.50% to 1.10% of the loan, charged by the month because you hold a bridge for months rather than years. On top of that sit an arrangement fee, a valuation fee, legal fees and sometimes an exit fee. A broker fee may also apply.

Put those together and you can size the real cost of any bridge before you commit. The headline rate alone never tells the full story.

This page breaks down every line so there are no surprises. It is information, not advice. For the full product and lender comparison process, see our bridging loans page.

The one number people get wrong: monthly versus annual

Start here, because this is where most cost mistakes begin. Bridging interest is quoted per month, not per year. A rate of 1% per month is not 1% per year. It is closer to 12% on an annual basis.

That sounds expensive next to a mortgage, and on an annual comparison it is. The point of a bridge is that you do not hold it for a year. You hold it for the weeks or months it takes to complete a purchase, finish a refurbishment, or refinance onto a term mortgage. Held for three months, a 1% per month loan costs roughly 3% of the amount borrowed in interest. That is the figure that matters.

So when you compare bridging finance rates, always think in total cost over your actual term, not the annualised number that lenders are required to show.

The interest rate, and what moves it

For most deals, indicative monthly interest sits between 0.50% and 1.10%. The cheapest published rates start around 0.44% per month, but those are reserved for low-LTV, clean cases with a strong exit. Most real deals land between 0.55% and 0.95% per month.

Four things move your rate up or down:

• Loan-to-value. Lower LTV means cheaper money, almost always. A 50% LTV bridge prices well below a 75% one.
• The exit. A clean, evidenced exit, such as an agreed sale or a term mortgage already in principle, reduces the lender’s risk and your rate.
• Property type. Standard residential prices keenest. Non-standard construction, commercial or land sits higher.
• Borrower profile. Adverse credit, foreign income or a complex structure adds to the rate, though specialist lenders still take these cases.

There are also three ways the interest itself is handled, and the lender confirms which applies. You can service it monthly like a mortgage, roll it up and clear it in full at the end, or have it retained from the advance on day one so you draw down slightly less. Rolled-up and retained interest matter on a refurbishment, where the property earns nothing during the works.

The four fees beyond interest

Interest is one line. Budget for the rest so the true cost is clear from the start.

• Arrangement fee. Paid to the lender, usually 1% to 2% of the loan. It is often added to the advance rather than paid in cash.
• Valuation fee. Paid up front to a RICS valuer. Indicatively £400 to £2,500 for standard property, higher for commercial or large schemes.
• Legal fees. Your own solicitor and the lender’s. Typically £750 to £3,500 for standard cases.
• Exit fee. Some lenders charge 0% to 1% on redemption. Many waive it entirely, so it is worth asking.

Our fee model is confirmed before any application and disclosed in writing before you commit. You can request a free bridging finance quote and review suitable routes before deciding whether to apply.

A worked example you can copy

Numbers make the cost real, so here is a full one.

You borrow £500,000 at 0.85% per month and hold it for three months. The interest comes to £12,750. Add a 1.5% arrangement fee of £7,500. Add a valuation at, say, £900 and combined legals of around £2,000. Set aside an exit fee only if your lender charges one.

On that deal the all-in cost of finance over three months is roughly £23,000, before any broker fee. Judge that against what the bridge secures: the auction lot you would otherwise lose, the deposit at risk in a broken chain, or the margin on a development you could not start without it.

Every figure here is indicative. The lender confirms the real numbers on application once it has seen the property and your file.

How to keep the cost down

You have more control over bridging loan costs than the headline rate suggests. Four levers do most of the work.

A lower LTV or additional security may improve the available pricing, subject to the lender’s assessment. A supported sale or refinance can strengthen the exit. Prepare the documents early because valuation and information gaps can extend the term and add interest. A whole-of-market broker can compare suitable lenders before you choose whether to apply.

The single biggest saving is repaying on time. Bridging is priced by the month, so finishing the works or completing the refinance on schedule keeps the total cost where you planned it.

Regulated versus unregulated, and why it touches cost

What secures the loan sets the category. Regulated bridging is secured against a property that is, or will become, your own home or an immediate family member’s. It falls under FCA mortgage rules and is capped at 12 months. Unregulated bridging covers investment, commercial and business property, runs up to 24 months, and is often quicker to arrange.

The category affects which lenders can act and therefore the rate available, so it is part of the cost picture. On any regulated case, a qualified adviser handles the advice.

Frequently asked questions

Get the real cost of your deal

If you want an accurate cost rather than a range, share the property, loan size, purpose, expected hold and exit. A broker can compare suitable routes and frame the interest, lender fees, valuation, legal costs and any broker fee over the planned term.

For the full product detail, costs and lender comparison, read our bridging loans page. This guide is information, not regulated advice. A qualified adviser confirms the regulatory position of your specific case on the call.