Bridging Loan Costs Explained — Every Fee You Need to Know

The True Cost of a Bridging Loan

The headline monthly rate is just one component of the total cost of a bridging loan. To make an accurate comparison between lenders and avoid surprises, you need to understand every fee involved. This guide breaks them down clearly.

As a general rule, the total cost of a 12-month bridging loan is typically 8% to 15% of the loan amount, depending on the rate and fees. On a £250,000 bridge, that means total costs of £20,000 to £37,500. Understanding where that money goes helps you negotiate and compare effectively.

Interest Charges

Interest is the largest cost component. At 0.65% per month on a £250,000 loan, the monthly interest is £1,625. Over 12 months, that's £19,500 in total interest.

How interest is charged matters. With rolled-up interest, the interest is added to the loan — you don't make monthly payments, but the total debt grows each month. With serviced interest, you pay the interest monthly, keeping the debt level. Rolled up is more common but results in a slightly higher total cost due to compounding.

Some lenders offer a 'retained' structure where all interest for the full term is deducted from the advance upfront. You receive a lower net amount but know the total cost from day one.

Arrangement Fee

The arrangement fee (also called a facility fee or completion fee) is charged by the lender for setting up the bridge. It is typically 1% to 2% of the loan amount — so £2,500 to £5,000 on a £250,000 bridge.

This fee is usually added to the loan rather than paid upfront, meaning it doesn't affect your available cash. However, it does increase the total amount repayable. Some lenders offer lower arrangement fees but charge higher monthly rates — or vice versa. Always compare the total cost.

Valuation, Legal, and Other Fees

Valuation fee: The lender requires a professional valuation of the security property. Desktop valuations (from around £300) are used for straightforward residential properties. Full RICS inspections (£1,000–£2,500+) are required for commercial, development, or complex properties.

Legal fees: You will need a solicitor, and so will the lender. Your legal costs typically range from £1,000 to £3,000 depending on complexity. Some lenders use dual representation (one solicitor for both parties), which can reduce costs. Lender legal fees may be additional or included in the arrangement fee.

Exit fee: Some lenders charge a fee when the bridge is repaid — typically 1% to 1.25% of the loan amount. Many lenders do not charge exit fees, so this is an important point of comparison. Always ask about exit fees before committing.

Broker fee: If you use a broker, they may charge a fee — typically 0.5% to 1% of the loan amount. Some brokers are paid by the lender (procuration fee) and don't charge you directly. At Bridging Loan Rates, we are transparent about our fees upfront.

Administration and drawdown fees: Some lenders charge smaller fees for administration, telegraphic transfer of funds, or ongoing monitoring. These are typically £100–£500 and should be disclosed in the offer letter.

How to Minimise Bridging Costs

Repay as quickly as possible. Bridging interest accrues monthly — the shorter the term, the less you pay. If you can exit in 3 months instead of 12, you save 9 months of interest.

Compare total cost, not just the rate. A low monthly rate with high fees can cost more than a higher rate with lower fees, especially on shorter bridges.

Negotiate. On larger bridges (£500,000+), there is often scope to negotiate the arrangement fee or monthly rate. An experienced broker can leverage competition between lenders to secure better terms.

Choose the right interest structure. If you have monthly cash flow, serviced interest avoids the compounding effect of rolled-up interest and reduces the total cost.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.