Bridging Loan Costs and Rates Explained

The cost of a bridging loan is not a single headline rate; it is a stack of charges, and the biggest one is the monthly interest. Bridging interest is quoted per calendar month (pcm), not per year, because the loan is short-term. Indicatively you will see rates from around 0.55% to 1.5% pcm on standard property security, though the number that actually applies to your case is decided by the lender once they have seen the security, the loan-to-value, the exit and your track record. We match you to lenders and get the case in front of the right one; we do not set the rate or approve the loan, the lender does.

The first choice that shapes your cost is rolled versus serviced interest. With serviced interest you pay the monthly interest as you go, like a standard mortgage payment, which keeps the balance flat and is cheaper overall, but you need the monthly cash flow to cover it. With rolled-up interest you pay nothing monthly; the interest is added to the loan and cleared in one lump at exit. Rolling up is common on refurbishment or development-style bridges where the property is not producing income, but it costs more in total because you are effectively borrowing the interest too. Some lenders also offer retained interest, where they hold back the full term's interest from the advance on day one, so you receive less cash up front but have nothing to service.

On top of interest sits the arrangement fee (sometimes called the lender or facility fee), typically around 1% to 2% of the loan, usually added to the balance rather than paid in cash. Then there is the valuation fee, paid to a surveyor to confirm the property's value and condition; this scales with property value and complexity and is usually paid up front. Legal costs are a real line item and often catch people out: you pay for the lender's solicitor as well as your own, and on bridging the lender's legals can run to several hundred or a few thousand pounds depending on the security and whether it is a first or second charge.

Watch for the tail-end charges too. Some lenders apply an exit fee on redemption, often expressed as a percentage of the loan or of the gross development value; plenty of straightforward bridges have no exit fee at all, so it is worth confirming before you commit. There may also be a minimum interest period, meaning you pay a set number of months' interest even if you redeem early. On our side, any broker fee is disclosed to you in writing before you proceed, alongside any commission the lender pays us; we do not believe in fees that only surface at completion.

Here is a rough illustrative example on a first charge. Say you borrow £200,000 at 0.85% pcm on a 9-month rolled-up term. Monthly interest is about £1,700, so nine months of rolled interest is roughly £15,300. Add a 1.5% arrangement fee (£3,000), a valuation of perhaps £700, and combined legal costs of, say, £1,800. Total cost of the money over the term is in the region of £20,800, and because interest rolled up, you clear the £200,000 plus the rolled interest and fees at exit. Change any input, a higher LTV, a weaker exit, a non-standard property, and the pcm rate moves up, so treat every figure here as indicative only.

Why does the rate vary so much between two similar-looking deals? Lenders price for risk, and four things drive it: the security (standard residential or commercial property prices keenly; unusual assets, part-built sites or specialist use prices higher), the LTV (lower gearing means a cheaper rate because the lender is better protected), the exit (a credible, evidenced exit such as an agreed sale or a term-mortgage offer beats a vague plan), and your experience (a developer with a completed track record often gets a better rate than a first-timer on the same scheme). Credit history matters less than on regulated lending because bridging is security-led, but it can still nudge pricing.

The honest bottom line is that no broker can quote you an exact all-in cost before a lender has assessed your specific file, and anyone who guarantees a rate is guessing. What we can do quickly is tell you which lenders are genuinely open to your security, LTV and exit, give you a realistic indicative cost range, and get the right lender instructed so you are not paying more than the deal warrants.