Bridging Loan Rates & Fees
Bridging Loan Rates
Find out the latest bridging loan rates, fees and charges and get the best deal with ABC Finance
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
When taking out a bridging loan, the biggest factor that most borrowers are concerned about is the total cost of the loan.
The cost of borrowing is made up by 2 parts, the interest rate charged, and any fees charged by the lender.
If you want a personalised quote, get in touch now and get the best deal with ABC Finance.
What is a bridging loan?
A bridging loan is a short-term, property backed loan that is used to purchase or refinance a property quickly.
Bridging finance is often used to purchase a property before your existing one is sold, or to purchase a property that will be refurbished. This is known as property refurbishment finance.
Are there different types of bridge loan?
Yes, there are different types of bridging loan. While most websites state the key types being an open or closed bridging loan, almost all lenders will expect you to have a robust exit strategy in place.
The main types of bridging loans are:
- Regulated bridging loans – these are loans that are secured against a property that you currently live in, plan to live in or have ever lived in.
- Unregulated bridging loans – these are loans secured against investment properties, such as buy to let investments or property refurbishment projects.
- Commercial bridging loans – These are, as the name suggests, loans secured against commercial property. For this reason they are the most common bridging loans for small businesses.
- Development exit finance – a key type of bridging loans for property developers that is used to repay a development finance facility while waiting for completed properties to sell.
- Auction finance – A type of finance used by those looking to purchase a property at auction. They are a form of fast bridging loan that is used to complete the purchase in 28 days or less.
Different types of bridging loan have come with different interest rates. Each the pricing of each loan is further dependent on other factors, such as the loan amount, loan to value (LTV), the borrowers credit history and your chosen exit strategy.
How does the type impact the interest rate charged on bridging loans?
The type of loan impacts the interest rate charged as lenders base the loan cost on the risk presented to them.
A residential property is usually seen as the lowest risk, and as such will benefit from the lowest rates.
Land is less liquid (easy to sell) and will therefore come with a slightly higher cost. The pricing of these loans is a good example of how bridging loan lenders price each application according to the risk presented to them.
If you’re unsure how much interest you’ll be charged, get in touch now and we’ll be able to give you a free personalised quote in under an hour.
We make it easy to compare bridging markets and avoid confusion between different loan offers, looking beyond just the headline loan rate.
Bridging loan interest rates explained
Bridging loan rates are expressed as a monthly figure, rather than annually.
This is due to the fact that bridging is considered a short-term loan that may be taken out for 12 months or less, for example, a loan could be taken out for as little as 1 month, or even 1 day.
What are typical bridging loan rates?
Residential bridging finance rates start from 0.55% per month, although this rate is only available up to a maximum of 55% Loan to value (LTV).
Due to the individual pricing of loans and the number of bridging lenders out there, it is hard to quote an average monthly interest rate. In general, most loans will fall between 0.7% and 1.05% per month. Below, we break down the factors that affect all the costs, and how you can secure the best deal.
Commercial bridging loan lenders tend to price each loan on risk, they will look at the type of property, location and you as the client. The best commercial bridging rates also usually start at around 0.85% per month.
As a guide, an interest rate of 1% per month is a good benchmark. For a riskier deal, such as an unusual property or an applicant with heavy adverse credit, rates will be around 0.9% – 1.25% per month. While rates are very important, the overall cost and your gross loan amount (where interest is added) must be considered.
Finally, loans against land will usually be priced between 1.05% – 1.25% per month. As each application is judged on its own merits, we do sometimes secure lower than standard rates if the risk is low for the lender.
Below is a quick guide to bridging loan rates by security type:
| Bridging loan type | Maximum LTV | Rates From |
| Regulated bridging loans | 75% | 0.55% per month |
| Residential | 90% | 0.55% per month |
| Semi-commercial | 75% | 0.65% per month |
| Commercial | 75% | 0.65% per month |
| Land | 65% | 1.05% per month |
| Property refurbishment | 90% | 0.7% per month |
How to reduce the interest rate charged on your bridging loan
The easiest way to reduce the interest rate charged on your loan is to reduce the loan to value ratio of your application.
You can do this by borrowing less, or by offering the lender additional security over another property.
Alternatively, you can find a better deal by using an experienced bridging loan broker who is well connected across the market.
Do I have to pay the interest monthly?
No, in most cases, the monthly interest can be added to the loan and repaid at the end of the loan term, or before if it is repaid early.
This is known as ‘rolled-up’ interest and is the most common way for bridging finance interest to be handled. Should you wish to make monthly payments, you can do so on an unregulated bridge, but the lender will want to ensure that it is affordable.
A breakdown of bridging loan fees
Bridging finance applications are usually subject to several different fees, which can become confusing. They can usually be broken down into the following:
Lender arrangement fee
This fee is payable to the lender for arranging your bridging loan. Often, this fee is added to the loan, meaning you don’t have to pay it out upfront. Lender arrangement fees are usually between 1-2% of the loan amount.
Broker fee
Broker fees are payable to your mortgage brokers for arranging your bridging loan. Most brokers charge a fee of 1% or more on completion of the loan, this can often be added to, or deducted from the loan. At ABC Finance Ltd we don’t usually charge broker fees for arranging bridging finance.
Upfront broker fee
Brokers often charge an upfront fee for processing your bridging finance application. This can’t be added to the loan and must be paid upfront. We never charge upfront fees for processing your application and recommend that you do not pay upfront fees to a broker under any circumstances.
Valuation fee
The valuation fee is payable for the undertaking of a basic survey of the security property. The report is usually quite basic and covers only the value of the property, some structural and demand issues and whether the property is suitable security for the loan.
The fee is usually payable early in the application process. We always try to ensure the lender is otherwise happy with the application before asking for the valuation fee to be paid. In some cases, valuation fees can be avoided where the lender will accept a desktop valuation.
Legal fees
Lenders usually require separate legal representation, which is paid for by the applicant. Some lenders will accept dual representation (use of the same solicitor for both sides), which can save time and money.
Exit fee
Some lenders charge an exit fee, usually either equal to one month’s interest, or 1-2%. Exit fees are charged on repayment of the loan and are usually added to the loan balance.
Frequently Asked Questions
How does loan to value impact the rate I’m charged?
Loan to value (LTV) impacts the interest rate of bridging loans as they directly correlate. A higher loan to value application will result in a higher interest rate, while lower LTVs will usually result in a lower rate.
How does property type impact bridging loan rates?
Residential properties usually receive the lowest rates, with semi-commercial, commercial and then land each becoming more expensive.
This is due to the liquidity of these assets – the more liquid an asset, the better security it is considered to be in the eyes of a lender.
How does the legal charge type impact bridging loan rates?
Bridging finance can be arranged on a 1st, 2nd or even 3rd charge loan basis. 1st charge loans tend to pay the lowest interest rates. A second charge bridging loan can either be arranged as a legal charge or an equitable charge.
Equitable charge bridging isn’t favoured by lenders, so loans set up in this way will usually have higher interest charges.
How does credit history affect bridging loan rates?
Lenders issue loans with the idea that they will get their money back, plus some profit by way of the fees and interest charged.
When working with an applicant who has a strong credit rating, lenders can be more confident that they will be repaid on time and in-turn, will accept lower interest charges as a result.
We offer a range of bad credit bridging loan options.
How does the location of the security property affect bridging loan rates?
This factor comes down to your ability to exit the loan.
Property in a location that has a highly liquid property market, and an abundance of available lenders willing to lend, will generally get the best rates. These locations are considered to be most places in England and Wales, plus parts of Scotland.
We can often offer lower rates on bridging loans in London. Some lenders will offer low rates on loans in Northern Ireland too, but this is less common.
