The short answer
A bridging loan costs a monthly interest rate plus a handful of fees. On a typical 9 to 12 month purchase bridge, the total often comes to between 8% and 15% of the loan. It depends mostly on the rate, how long you keep the loan, and the fees your lender charges.
Every cost, and when you pay it
| Cost | Typical range | When it's paid |
|---|---|---|
| Interest | Charged monthly, quoted as a % per month | Retained or rolled up (taken at the end), or paid monthly |
| Arrangement fee | Usually 1% to 2% of the loan | Added to the loan or deducted at drawdown |
| Broker fee | Capitara: 1% of the loan | On completion only |
| Valuation | Set by the surveyor, rises with property value | Upfront, before the offer |
| Lender's legal fees | Depends on the deal's complexity | On completion |
| Your own solicitor | Depends on the firm and the deal | On completion |
| Exit fee | Often none; some lenders charge around 1% | When you repay |
Ask for every fee in writing before you commit. A low rate with a high exit fee can cost more than a higher rate with none.
How the interest works
Bridging interest is quoted per month, not per year. It can be:
- Retained: the lender keeps back the interest for the term from the loan at the start. You make no monthly payments, but you receive less cash on day one.
- Rolled up: interest is added to the balance each month and repaid at the end.
- Serviced: you pay it monthly, like a mortgage. More of the loan stays available to you.
Most lenders charge only for the months you actually use, so repaying early saves money. Check for a minimum interest period, often one to three months.
A worked example
An investor buys a house for £300,000 and borrows £225,000 (75% loan to value) for 9 months at 0.85% a month. Interest is retained and the arrangement fee is deducted at drawdown.
| Interest: £225,000 × 0.85% × 9 months | £17,213 |
| Arrangement fee at 2% | £4,500 |
| Broker fee at 1%, on completion | £2,250 |
| Valuation, legal fees on both sides (illustrative) | £4,000 |
| Total cost of the loan | £27,963 |
| Cash released on day one (£225,000 less retained interest and arrangement fee) | £203,288 |
If the investor repaid after 6 months instead of 9, they would usually save about £5,700 of interest. Figures are illustrative only. Your rate and fees depend on the property, the valuation, your experience and credit, and the lender.
Five ways to cut the cost
- Have a realistic exit. A clear sale or refinance plan gets better rates and avoids paying to extend.
- Don't borrow longer than you need, but leave a margin. Extensions usually cost more than a slightly longer term.
- Use a solicitor who knows bridging. Slow legals mean more months of interest.
- Lower the loan to value if you can. Lenders price the lowest-risk loans most keenly.
- Compare the total cost, not the headline rate. Add every fee for your expected term before you choose.
Get a figure for your own deal
Use our bridging loan calculator to check your loan to value and illustrative costs, or read what a bridging loan is if you're new to them. When you're ready, send us your deal and we'll come back the same working day.