Bridging loans involve more fees than a standard mortgage. Here's exactly what you'll pay.
Unlike standard mortgages quoted as annual rates, bridging loans are typically priced as a monthly interest rate, usually between 0.4% and 1.5% per month. This equates to roughly 5–18% per year, making bridging significantly more expensive than a mortgage.
The monthly rate you're offered depends on your loan-to-value ratio (LTV), the property type, your exit strategy, and the speed of completion required.
Most bridging lenders charge an arrangement fee (also called a facility fee) of 1–2% of the gross loan amount. On a £300,000 bridge, that's £3,000–£6,000.
This fee is usually added to the loan rather than paid upfront, meaning you pay interest on it too. Some lenders charge a lower headline rate but a higher arrangement fee — always compare the total cost.
💡 Always ask for the total cost of the bridging loan, not just the monthly rate. The arrangement fee, exit fee, and legal costs can add significantly to the overall expense.
With retained interest, the full interest for the loan term is deducted upfront and held by the lender. You make no monthly payments during the term. With serviced interest, you pay monthly. Rolled-up interest means interest compounds monthly and is paid at the end.
Retained interest is most common for short-term bridges. It reduces your net loan amount but removes the burden of monthly payments during the bridge period.
⚠️ Some bridging lenders charge early repayment penalties even within the agreed term. Check whether you can repay early without penalty — this is crucial if your exit strategy completes ahead of schedule.
To compare bridging loans fairly, calculate the total cost of borrowing including all fees, not just the headline rate. A loan at 0.55% per month with a 2% arrangement fee may cost more overall than one at 0.65% with a 1% fee.
A specialist bridging broker will produce a comparison showing the total cost of each option, making it much easier to choose the cheapest deal for your situation.
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