How much does a bridging loan cost? Interest, fees and the total
A bridging loan costs monthly interest plus a set of fees, and the total depends on how long you hold it. See how each part is charged and follow a worked illustration you can reproduce in our calculator.
In short
- The cost is interest for every month you hold the loan, plus the lender's arrangement fee, the valuation, both sets of legal costs and any broker or exit fee.
- Interest can be paid monthly, retained from the loan at the start or rolled up and repaid at the end, and the choice changes the cash you receive and the amount you repay.
- Compare offers on the net advance and the total cost over the same realistic term, not on the monthly rate alone.
- Ask in writing how your broker is paid before you commit: a fee from you, commission from the lender, or both.
- A late exit is the biggest extra cost, so choose a term with time in hand.
On this page
A bridging loan costs three things: interest, charged per month for as long as you hold the loan; the lender's arrangement fee; and the costs of setting the loan up, mainly the valuation, legal work and any broker fee. Some lenders also charge a fee when you repay. The rate and fees you will pay come from the lender's written offer, because each case is priced on the property, the loan to value and how the loan will be repaid. To see how the parts add up, put your own figures into the bridging loan calculator.
Why bridging interest is quoted per month
Bridging interest is quoted per month because the loan is meant to last months, not years. A monthly rate lets you multiply by the months you expect to borrow and see the interest bill at once. It also shows what a delay costs: each extra month adds another month's interest. For a rough yearly figure to set beside a mortgage rate, multiply the monthly rate by twelve. Our guide to bridging loans and mortgages compares the two.
The three ways interest is paid
You do not repay capital month by month. The whole loan is repaid in one sum at the end, from your exit strategy. What varies is how the interest is handled.
| Method | How it works | Money you receive | What you repay at the end |
|---|---|---|---|
| Serviced | You pay the interest every month | The loan, less fees deducted | The loan |
| Retained | Interest for the agreed term is deducted from the loan at the start | The loan, less fees and the retained interest | The loan |
| Rolled up | Interest is added to the debt and repaid with it at the end | The loan, less fees deducted | The loan plus the interest |
Serviced interest needs income the lender can check. Retained and rolled-up interest need no monthly payment, which suits a property that earns nothing during the loan, but retained interest reduces the cash you receive and rolled-up interest increases the debt. Ask two questions before you choose. If you repay early, is unused retained interest refunded? Is rolled-up interest compounded, so that interest is charged on interest?
Gross loan and net advance
The gross loan is the total facility. Interest and loan to value are worked out on it. The net advance is the amount you actually receive on completion, after the arrangement fee and any retained interest have been deducted. A purchase has to be funded from the net advance plus your own money. If you need a set sum on completion day, compare offers on the net advance, not the gross loan.
Every fee, who charges it and when
- Arrangement fee. Charged by the lender for setting up the loan, as a percentage of it. It is deducted from the advance on completion, or added to the loan, where it attracts interest.
- Valuation fee. Charged for the valuation the lender instructs and usually paid before the offer is issued. It depends on the property's value and type, and is not normally refunded once the valuation has been done.
- Your legal costs. Charged by your own solicitor and paid on completion.
- The lender's legal costs. Charged by the lender's solicitor and normally paid by you. Part can be due even if the loan does not complete.
- Broker fee. Charged by the broker, where one applies, usually on completion.
- Exit fee. Charged by some lenders, not all, when the loan is repaid.
- Administration or redemption fees. Charged by the lender, usually when you repay, for tasks such as issuing a redemption statement or releasing its charge.
- Extension fee. Charged by the lender if it agrees to extend the term. Interest continues as well.
- Default interest. A higher rate the lender can charge if the term ends and the loan has not been repaid, or you break its terms.
The lender's offer should list every charge that applies. A purchase also brings tax, which is not a finance cost but comes out of the same cash: Stamp Duty Land Tax in England and Northern Ireland (Scotland and Wales have their own taxes), due within 14 days of completion. If you complete on a new home before your old one is sold, GOV.UK says the higher rates usually apply (5% on top of the standard rates since 31 October 2024) and that you can apply for a refund of the extra if the old home is sold within three years. Your conveyancer will confirm what applies to you.
A worked illustration
These are the example figures the calculator opens with, so you can reproduce the result there. They are inputs chosen to show the arithmetic, not rates or fees on offer.
- Property value: £400,000
- Loan amount: £260,000
- Monthly interest rate: 0.95%
- Term: 9 months
- Arrangement fee: 2%
- Other costs (valuation and legal): £3,000
The arithmetic, using simple interest:
- Loan to value: £260,000 ÷ £400,000 = 65%.
- Interest per month: £260,000 × 0.95% = £2,470.
- Total interest over the term: £2,470 × 9 = £22,230.
- Arrangement fee: £260,000 × 2% = £5,200.
- Total cost of borrowing: £22,230 + £5,200 + £3,000 = £30,430.
| Interest method | Paid each month | Net advance on day one | Amount to repay at the end |
|---|---|---|---|
| Serviced | £2,470 | £254,800 | £260,000 |
| Retained | Nothing | £232,570 | £260,000 |
| Rolled up | Nothing | £254,800 | £282,230 |
The net advance is £260,000 minus the £5,200 fee, which is £254,800. When the £22,230 of interest is retained as well, it falls to £232,570. With rolled-up interest you repay £260,000 plus £22,230, which is £282,230. The total cost is £30,430 whichever method you choose. What changes is when the money leaves you.
Like the calculator, these sums assume simple interest on the full loan for the whole term, the arrangement fee deducted from the advance and the other costs paid separately. A real offer may add the fee to the loan, compound rolled-up interest or include an exit fee, so its figures will differ.
What moves the price
Lenders price the risk of not being repaid in full and on time. Six things matter most.
- Loan to value. The smaller the loan against the property's value, the bigger the lender's cushion and, as a rule, the keener the price.
- Property type. A standard house or flat is easier to value and sell than commercial premises, land or an unusual building, and is priced accordingly.
- Exit strength. A sale that has exchanged, or a mortgage already offered, is a lower risk than a plan with no evidence yet, and lenders price for that.
- Credit history. Past arrears or defaults do not always rule a loan out, but they narrow the choice of lenders, which usually raises the cost.
- Speed. A very short deadline limits you to lenders that can meet it and can add cost.
- First or second charge. A lender in second place, behind an existing mortgage, is repaid second and usually charges more. Our unregulated bridging loans page explains first and second charges.
How to compare two offers
Compare the total cost over the months you expect to borrow, and the net advance. The headline monthly rate alone tells you little.
- Use the same realistic term for both, with a margin for delay.
- Add the interest for that term, the arrangement fee, any exit fee, the valuation, both sets of legal costs and any broker fee.
- Check that each net advance covers what you need on completion.
- Read what happens if you repay early or run late: the minimum interest period, the extension terms and the default rate.
An offer with a lower monthly rate and an exit fee can cost more in total than one with a higher rate and no exit fee. In the calculator, add any exit fee to the other costs box so that it shows in the total.
How the broker is paid
A broker may be paid by a fee you pay, by a commission from the lender, or by both. Whichever applies, ask for it in writing before you commit: what you will pay, when it falls due, whether anything is payable if the loan does not complete, and what the lender pays the broker.
What to do next
Open the bridging loan calculator, check the illustration above, then replace the example figures with your own. Read how bridging loans work if you have not used one before. When you want real terms, tell us about the property, the amount and how you will repay, and we will set out what lenders are likely to offer and the total cost of each option.
A bridging loan is secured on property. If it is not repaid, the property can be repossessed, and an exit that runs late is what makes bridging expensive, so borrow only against a realistic plan to repay.