How Much Does a Bridging Loan Cost?

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Arrangement/Facility Fees

Valuation Fees

Legal Fees

Broker Fees

Interest

Exit Fees

Bridging loans are more expensive than traditional mortgages and secured loans, however, they can be a cost-effective solution for the right situation.

We always recommend factoring the costs of a bridging loan into the overall cost of the refurb, purchase, or capital raise for a true reflection of the return on investment.

The cost of a bridging loan is made up 6 parts, these are:

Arrangement/Facility Fees

The more you borrow the lower the percentage, however, arrangement fees range from 1-2% of the loan amount for loans up to £500,000. This fee is included in the loan amount.

Valuation Fees

Your bridging loan lender will require an independent valuation of your property to ensure it has sufficient security in place in the event of repossession. This fee is usually a few hundred pounds and will need to be paid upfront.

Legal Fees

The legal fees on a bridging loan are more expensive than with a traditional mortgage or secured loan, also, you’ll usually have to pay for the lender’s legal fees also.

When selecting a Solicitor, it’s important that you select a local one as some lenders require you to visit their office to run through the paperwork face to face. As part of our service, we can help you find a local one that has experience with bridging if you require.

Broker Fees

Using a broker and having access to their experience and knowledge of bridging product criteria will help your chance of being accepted. It’s important to use an independent mortgage broker who can access bridging loans and all alternative lending solutions.

This will ensure you have peace of mind that you have the best solution for your situation. Your bridging loan broker will also help you with any refinance or remortgage options in the future as and when required.

Interest

With a bridging loan, you’ll pay a monthly interest payment to the lender. The interest rate is typically higher than with traditional mortgages due to the short-term nature of the lending.

Often, if they have enough equity available, customers choose to not make monthly payments and to let the interest compound and ‘roll-up’. This can be then paid as a lump sum when the loan is repaid.

Interest rates are priced based on risk, the factors that affect what interest rate you qualify for include:

• How much equity you have, the more the better as this means less risk to the lender.
• Whether you have an existing mortgage on the property or not, if the bridging loan is a second charge, the rates will be higher as in the event of repossession, the first charge mortgage will be repaid first increasing risk.
• Your credit score, if you have a low score or bad credit, you’ll likely be paying an increased rate of interest as you are deemed as higher risk.

Exit Fees

A small number of bridging loan lenders will charge an exit fee when you repay the loan.

Our bridging loan broker team will ensure that you understand what fees are payable and when, so you know the true cost of finance before you apply.

Without experienced advice, costs and interest can quickly add up and erode your investment. Using a trusted broker will save you both time and money.

Written by
Malcolm Davidson
Managing Director of UK Moneyman Ltd.
MAQ & CeRER Qualified

3rd May 2024

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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