The five costs that make up a bridging quote
A bridging quote has more moving parts than a mortgage illustration, and the headline monthly rate is rarely the biggest surprise. The costs to add up are: monthly interest, typically 0.75% to 1.1% of the gross loan; an arrangement fee, usually about 2% of the gross loan; a valuation fee, often £300 to £1,500 depending on the property; legal fees, and on a bridge the borrower normally pays the lender's legal costs as well as their own; and on some products an exit fee, commonly 1% where charged, though many lenders charge none. Broker fees vary by firm and case and are disclosed before any application.
Retained, rolled and serviced interest
How the interest is paid changes the cash flow and the sums. With serviced interest, the borrower pays monthly, as with an interest only mortgage. With retained interest, the lender deducts the full term's interest from the advance on day one. With rolled interest, it accrues and is repaid with the loan at the end, usually compounding monthly. Most short term property bridges use retained or rolled interest because the property often produces no income during the works.
This is where the gross versus net distinction matters. The gross loan is the figure the lender secures against the property and charges interest on. The net advance is what actually lands with the solicitor after retained interest and the arrangement fee are deducted. Borrowers who budget off the gross figure find the shortfall at completion.
A worked example: £200,000 over 12 months
Take a gross loan of £200,000 over 12 months at 0.85% a month with retained interest, a 2% arrangement fee and no exit fee.
| Item | Calculation | Cost |
|---|---|---|
| Retained interest | £200,000 x 0.0085 x 12 | £20,400 |
| Arrangement fee | £200,000 x 2% | £4,000 |
| Valuation and legals (both sides) | estimate | £2,500 |
| Total cost | £26,900 |
£26,900 on a £200,000 loan is roughly 13.5% over the year, or a little over 1.1% a month all-in against a headline rate of 0.85%. The net advance is also worth setting out: £200,000 gross minus £20,400 retained interest minus the £4,000 fee leaves £175,600 reaching the solicitor. A borrower who needs £190,000 of actual cash would need a larger gross loan, which in turn increases the interest and fee. Our bridging cost calculator runs these figures for any loan size, rate and term.
What moves the monthly rate
Pricing is driven by loan to value first: bridges at 50% LTV price towards the bottom of the 0.75% to 1.1% range, while 70% to 75% LTV sits at the top. The asset matters, with standard houses pricing better than flats above takeaways or part-complete developments. So does the exit: a case with an agreed sale or a decision in principle for the remortgage is easier to place than a plan described only in conversation. First charge bridges price below second charges, and regulated bridges on a borrower's own home sit in a separate, smaller market.
Term length cuts both ways
Most bridges run 6 to 18 months, and interest is normally only charged for the months actually used, so repaying a 12 month retained bridge in month eight usually triggers a refund of the unused interest, subject to any minimum interest period of one to three months. Taking too short a term is the more expensive mistake: extending past the end of term means an extension fee, sometimes a new valuation, and on some products a default rate. Building slack into the term costs little if the loan repays early.
Comparing quotes on level terms
Two quotes with the same headline rate can differ by thousands once fees are included, so the like for like comparison is the total pound cost over the expected term, plus the net advance on day one. It is the same discipline whether the bridge is for an auction purchase against a 28 day deadline or a refurbishment. And because the loan has no long term repayment structure, the cost only stops when the exit completes, which is why lenders scrutinise how the bridge will be repaid before they lend. A weak exit does not just risk extension fees, it usually means a higher rate from day one.
Related questions
What is the difference between the gross loan and the net advance?
The gross loan is the total figure the lender secures and charges interest on. The net advance is what remains after retained interest and the arrangement fee are deducted, and it is the cash that actually reaches your solicitor. On a £200,000 gross loan with £20,400 retained interest and a £4,000 fee, the net advance is £175,600.
Do I pay interest for the full term if I repay early?
Usually not. Most lenders charge interest only for the months the loan runs, subject to a minimum interest period of typically one to three months, and refund unused retained interest at redemption. The redemption statement sets out the exact figure, so it is worth checking the minimum period before signing.
Why do I pay the lender's legal fees as well as my own?
It is standard practice in bridging. The lender instructs its own solicitor to protect its security and passes that cost to the borrower, so a realistic budget covers two sets of legal fees plus the valuation. On a straightforward case the combined figure is often £1,500 to £3,000.
Is there an APR I can use to compare bridging loans?
Regulated bridging loans quote an APRC, but most investment bridges are unregulated and quote a monthly rate plus fees instead. Annualised percentages can mislead on a loan that may run only a few months, so the cleaner comparison is the total pound cost over your expected term, including all fees.
What happens to the cost if I go past the end of the term?
Extending usually means an extension fee, often around 1%, sometimes a fresh valuation, and on some products a higher default rate on the balance. Lenders would generally rather extend than enforce, but the cost rises quickly, which is why the exit plan matters as much as the headline rate.
Are bridging rates fixed for the term?
Usually yes. The monthly rate is normally fixed at the outset for the agreed term, so a 12 month bridge at 0.85% a month stays at 0.85% for those 12 months. Rates for illustration only, since pricing moves with the market and with the details of each case.
Talk it through with us
Every case is different. Call us, message us on WhatsApp, or send us the basics and one of our team will come back to you about bridging finance, usually the same working day.