Thinking about a bridging loan for your next project? Whether you’re a seasoned property investor or just dipping your toes in the market, understanding the cost is key.
Bridging loans have come a long way since their origins in the 1960s. Once a last resort for buyers stuck between selling and buying, they’re now flexible financial tools for all kinds of scenarios, from snapping up auction properties to financing big refurbishments.
With loan terms from 1 to 24 months and borrowing amounts between £25,000 and £100 million, it's vital to get a handle on the costs. These can include arrangement fees, drawdown fees, valuation, legal and intermediary fees.
In the article below, we'll explore these costs, providing an overview as to what they are and how much you can expect to pay, whilst also suggesting some practical tips to help you identify the most cost-effective solution for your property development needs.
Bridging loans are short-term, fast, and flexible financing solutions named for their role in bridging temporary funding gaps between buying and selling (or refinancing) property or land.
| Key Features | Key Figures |
| Loan Term | 1 - 24 months |
| How Much Can I Borrow | £25,000 - £100 million |
| Interest Rates | Starting from 0.75% per month (Q3 2024) |
| Arrangement Timeframes | 3 days - 6 weeks |
Some typical uses include:
To secure a bridging loan, the borrower must demonstrate a clear exit strategy, whether selling the property the loan is secured against, selling another property, liquidating other assets or refinancing.
When exiting a bridging loan agreement, refinancing options generally include:
While bridging loans generally have higher costs than traditional financing like residential mortgages, they are not as expensive as you might think. In fact, with recent increases in mortgage rates, some bridging products are priced similarly to buy-to-let (BTL) loans.
There are hundreds of bridging loan lenders in the market, from high street banks to specialist lenders, each offering different rates, fees, and costs.
Let's take a look at the typical costs associated with bridging loans below.
Interest rates on bridging loans are usually charged daily, so you only pay for the time you use the loan. Some lenders charge monthly, meaning you pay a full month’s interest if you exit partway through the month - find this out from the outset, as avoiding this type of arrangement can save you thousands of pounds.
Interest can be paid in two ways:
Rates currently range from 0.75% - 1.4% monthly (Q3 2024).
Various factors and perceived risk to lenders determine the rate you pay. Factors influencing rates include:
Lenders charge a fee for arranging the loan to cover administrative costs involved in processing an application, such as performing credit searches.
The cost of a bridging loan arrangement fee is up to 2% of the net or gross loan.
Brickflow’s live bridging loan calculator tells you exactly what the arrangement fees are on each loan option.
They are typically included in the total loan and paid at the end of the term when the loan is settled.
No. Every lender will charge arrangement fees.
Some lenders charge a fee when the loan is repaid, but this is uncommon in bridging finance. Almost none of the lenders on the Brickflow platform charge exit fees. Instead, there may be a minimum term, typically between 1 and 6 months, and exiting before this period would incur a charge.
When the loan has been repaid, redemption fees cover the cost of removing the lender’s legal charge from the property.
It varies but the cost is typically around £120.
When closing the loan.
No.
Lenders require a property valuation by a surveyor before arranging a bridging loan. Any additional assets used as security must also be individually valued.
Costs vary based on the property's value, the scale of any work, and its complexity. As a guide, budget around 0.1% of the property value.
After securing a Decision in Principle (DIP) and submitting your application, you'll pay for the valuation before receiving a final offer (which will be based on the valuation figure). Valuation fees are therefore paid whether the loan completes or not.
Almost certainly not, but there are a handful of private lenders that will conduct site visits and not always insist on formal valuations, or some lenders may accept less expensive desktop valuations for certain properties.
Any transaction involving a property title requires legal work. A bridging loan involves the lender placing a ‘charge’ against the property title, allowing them to legally possess the property in case of default. This process also applies when the loan is fully redeemed by the borrower.
You must cover both the lender’s and your own legal fees. Costs vary based on the solicitors used and the property’s type and value, but expect to pay a minimum of £ 2.5k + VAT for the lender's solicitor.
Whilst not due until completion, you effectively pay them upfront as you’ll need to provide an undertaking for the lender's legal costs (and your own legal costs) to your solicitor before either side starts work. If the transaction aborts, then any legal fees incurred to that point will be deducted from the monies held with your solicitor.
No.
Specialist Intermediaries/debt advisors earn a fee from the lender for finding and securing your loan, and leveraging their expertise and relationships in the UK bridging market.
Typically, broker fees are covered by the lender, with the 2% arrangement fee being equally split. Some brokers might charge an additional fee on top of this. Commitment fees for the intermediary to prepare the application are quite common . Ask about fees upfront.
The arrangement fee is incurred when the loan completes. Administration or commitment fees would normally be paid at the start of the application..
Yes, as they are generally covered by the lender.
A good intermediary can save you tens or even hundreds of thousands of pounds and ensure you secure the best loan, making their fees worthwhile for many property investors.
When calculating your project's viability, it’s important to consider all costs and fees that make up the bridging loan. While set fees like valuation and legal fees are unavoidable, you can reduce overall costs by comparing loans across the breadth of the UK lending market.
Instantly search and compare loans from over 50 bridging lenders, including banks, non-banks, and specialists. Our real-time bridging calculator saves you time and money, helping you find the best rates and fees.
It’s worth considering the bigger financial picture, though. As well as focusing on rates, consider your return on capital employed (ROCE) and whether or not having equity available to invest elsewhere simultaneously will offer greater returns.
To better understand how much a bridging loan costs, let’s take a look at a hypothetical scenario below:
| Purchase Price | £500k |
| Purchase Costs | £25k |
| Cost of Works | £300k |
| Location | South-East London |
| GDV (Gross Development Value) | £1.2m |
| Loan Type | Refurbishment bridging |
| Loan Term | 18 months |
With both loans, the additional costs would be approximately:
The quickest, most accurate way to calculate how much a bridging loan will cost for your property investment is by using Brickflow’s real-time bridging loan calculator.
Bridging loans, like any specialist finance, tend to cost more than traditional long-term borrowing options, but they can be more affordable than you might expect and offer unique opportunities that justify the expense. Understanding the full spectrum of costs—from interest rates and arrangement fees to legal and valuation fees—allows you to make an informed decision.
To streamline your process and ensure you’re getting the best deal, use Brickflow to compare live borrowing costs from a wide range of lenders.
Bridging loan rates range from 0.75% - 1.4% per month (Q3 2024). The rate depends on factors like LTV, property characteristics, loan term, exit strategy, borrower credit, and experience.
Costs vary by lender and loan, including interest, arrangement fees, valuation fees, intermediary fees, legal fees, and drawdown fees. Exit fees are rare. Interest is typically charged daily, and therefore only for the time you use the loan (but some lenders charge monthly, so ask for clarification upfront).
Deposits depend on LTV. For a £200,000 purchase with a 70% LTV, you need a £60,000 deposit plus purchase costs, but you also need to add the lender interest costs and arrangement fees to the total borrower contribution. Assume between 10% and 15% of the loan amount for 12 months. Therefore, the total deposit contribution might grow from £60k to £75k. Lower LTVs require more deposit but offer better rates. The maximum LTV for bridging finance is typically 75%.
Usually not. Most bridging lenders roll up the interest and it is paid in full at exit. Some lenders will offer serviced bridging loans (paid monthly), but they will need to see evidence that you can comfortably afford the monthly repayments.
Securing a bridging loan can be straightforward if you can demonstrate to the lender a clear, viable proposal with a realistic exit strategy. Lenders will want to see detailed project plans with accurate costings, thorough market research, and evidence of your (and your team’s) previous experience. A spreadsheet with vague or estimated numbers won’t interest lenders.
Read more about bridging loan eligibility criteria.
It can be possible to secure a bridging loan without contributing a deposit - instead you would use additional assets. This comes down to the lender and is assessed case by case.
Not always, as the focus is on the exit strategy. However, proof of income and a good credit file can strengthen your application. For serviced loans, lenders will need to provide proof of income and will carry out affordability testing.
Loan approval can be very quick; our record through the Brickflow software is just 7 minutes . You can complete the loan within a few days using lenders that work with automated valuation models (AVM), or desktop valuations, and accept title insurance without requiring searches. However, between 2 and 4 weeks is more common.
Working with a specialist solicitor will speed up the process.
You'll need proof of ID and address, recent bank statements, an assets and liabilities schedule, a detailed project plan, and evidence of a viable exit strategy.
Yes, it is possible, but rather than 100% finance, it is more of a ‘cashless’ deal using alternate collateral (other properties that you own) instead of capital. This is not standard and is assessed on a case by case basis.
Typically, bridging loans can last up to 24 months, with 12 to 18 months being standard.
Yes, depending on the property type and condition, you can transition or refinance from a bridging loan onto a mortgage. Options include residential, buy-to-let, or commercial mortgage.