Bridging Loan Costs UK — All Fees, Interest & Charges 2026

Q: What are the typical costs of a bridging loan?

A typical bridging loan costs: monthly interest of 0.55%–1.25% (charged on the outstanding balance), an arrangement fee of 1%–2% of the loan amount, a valuation fee of £500–£2,000, legal fees of £1,500–£3,000 (both sides), and sometimes an exit fee of 0.5%–1%. On a £500,000 bridging loan over 6 months, total costs typically run to £35,000–£65,000 depending on the rate and fee structure.

Q: How is bridging loan interest charged?

Bridging loan interest is charged monthly on the outstanding balance, not annually upfront. You have three options for how to handle it: rolled interest (added to the loan balance each month, paid on exit — no monthly cash outflow), retained interest (deducted from the facility upfront at the start, reducing the net advance), or serviced interest (paid monthly from your own funds). Rolled and retained are most common for property investors.

Q: What is an arrangement fee on a bridging loan?

The arrangement fee (also called a facility fee or completion fee) is a one-off charge by the lender for setting up the loan, typically 1%–2% of the gross loan amount. It is usually deducted from the loan proceeds on completion rather than paid upfront in cash. On a £500,000 loan at 1.5%, the arrangement fee would be £7,500.

Q: Do all bridging loans have exit fees?

No — many bridging lenders charge no exit fee at all. Where exit fees do apply, they are typically 0.5%–1% of the loan amount, charged on redemption. They are more common among lenders offering lower headline interest rates as a way of recouping cost over the loan term. Always check the total cost including exit fees, not just the monthly rate.

Q: Can bridging loan costs be added to the loan?

Yes — most costs can be rolled into or deducted from the loan facility rather than paid in cash at completion. The arrangement fee is typically deducted from the gross advance. Interest can be rolled (added monthly to the balance) or retained (deducted upfront). Solicitor fees and valuation fees are usually paid separately. The practical effect is that your net day-one advance is less than the gross loan amount.

Q: How can I reduce my bridging loan costs?

The most effective ways to reduce bridging loan costs: use a broker who has access to the whole market (not just panel lenders), negotiate on arrangement fees — they are often reducible on larger loans, keep the loan term as short as possible (interest accrues monthly), have a clean exit strategy that gives the lender confidence, and consider whether retained interest (paying less total if you exit early) suits your project better than rolled interest.

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Bridging loan costs catch borrowers out more than almost anything else in property finance. The headline monthly rate looks low — 0.65% doesn't sound like much — but the full cost picture includes arrangement fees, exit fees, valuation, legal fees on both sides, admin charges, and rolled interest that compounds over the loan term. This guide breaks down every cost component, shows you exactly what to expect on a typical loan, and explains how to minimise what you pay.

The Full Cost Breakdown

1. Monthly Interest Rate

The primary cost of a bridging loan — charged monthly on the outstanding loan balance. Rates range from 0.55%/month for straightforward, low-LTV loans to 1.25%/month or more for complex, high-LTV, or specialist deals. Note: you pay interest on the gross loan amount (including rolled interest), not just the original advance.

2. Arrangement Fee

A one-off lender fee for setting up the facility — typically 1%–2% of the gross loan. On a £500,000 loan at 1.5%, that's £7,500. Usually deducted from the loan proceeds at completion rather than paid upfront in cash.

3. Exit Fee

Some lenders (not all) charge an exit fee of 0.5%–1% on redemption. More common among lenders offering lower headline rates. On a £500,000 loan with a 1% exit fee, that's £5,000 payable when you repay. Always factor this into your total cost comparison.

4. Valuation Fee

An independent RICS valuation is required by all bridging lenders — costs £500–£2,000 for residential, £1,500–£5,000 for commercial or complex properties. Paid upfront, not from the loan. Some lenders will allow a desktop or drive-by valuation on lower-risk residential deals, reducing cost and time.

5. Lender Legal Fees

The lender's solicitors charge for their due diligence work — typically £1,500–£3,000. These are paid by you (the borrower), not the lender. They cover title review, facility documentation, and charge registration.

6. Your Own Legal Fees

Your solicitor's fees for the transaction — typically £1,000–£2,500 for a standard bridging completion. If the bridging loan is also funding a property purchase, add conveyancing costs on top.

7. Broker Fee

If you use a broker (recommended for complex deals), they typically charge 1% of the loan amount, sometimes a fixed fee. A good broker should save you more than their fee by accessing better rates and negotiating fees. Broker fees vary — some charge upfront, others are paid by lender commission only.

8. Administration / Drawdown Fees

Some lenders charge small admin fees — CHAPS payment fees (£25–£50), drawdown fees for development facilities (£250–£500 per drawdown), or title insurance. These are typically minor but worth checking in the offer letter.

How Bridging Interest Is Charged — The Three Methods

How you handle the monthly interest significantly affects your cash flow and total cost. There are three approaches:

Rolled Interest (Most Common)

Interest is added to the loan balance each month rather than paid from your own funds. No monthly cash outflow — everything is settled on exit when you repay. The catch: interest compounds on the growing balance. On a £500,000 loan at 0.75%/month over 9 months, rolled interest adds approximately £34,000 to the balance by the time you exit.

Retained Interest

The full interest for the agreed term is calculated upfront and deducted from the gross advance on day one. You receive less net funding but pay no further interest if you exit on time. If you exit early, the lender refunds the unused retained months. Better if you're confident of a short, defined exit timeline.

Serviced Interest

You pay the monthly interest from your own funds — like a standard mortgage payment. No compounding, lowest total interest cost, but requires regular cash outflow. Suitable for borrowers with reliable monthly income who want to keep the loan balance down.

Method	Monthly Cash Outflow	Total Interest (6 months, £500k at 0.75%)	Best For
Rolled	None	~£23,000 (compounding)	Investors with no monthly income from asset
Retained	None (deducted upfront)	£22,500 (simple)	Short, defined exit timelines
Serviced	£3,750/month	£22,500 (simple)	Borrowers with regular income

Worked Example — Full Cost of a 6-Month Bridging Loan

Loan: £600,000. Rate: 0.75%/month. Term: 6 months. Rolled interest. Arrangement fee: 1.5%. No exit fee.

Cost Item	Amount
Gross loan amount	£600,000
Arrangement fee (1.5%)	£9,000 (deducted from advance)
Net day-one advance	£591,000
Monthly interest on £600k at 0.75%	£4,500/month
6 months rolled interest (approx)	£27,500 (compounding)
Valuation fee	£1,200
Lender legal fees	£2,000
Your legal fees	£1,500
Total repayment on exit	£627,500 (loan + interest)
Total cost of finance	~£41,200 (6.9% of original loan)

How Bridging Costs Compare to Other Finance

Finance Type	Typical Annual Cost	Typical Term	Best Use
Bridging loan	7%–15% p.a. (all-in)	1–18 months	Speed, short-term, non-standard
Buy-to-let mortgage	4%–7% p.a.	2–5 years	Long-term rental investment
Commercial mortgage	5%–8% p.a.	5–25 years	Long-term commercial ownership
Development finance	8%–12% p.a.	6–24 months	New build or major conversion

Bridging costs more per annum than long-term finance — but it's designed for short-term use. The cost per month on a 3-month bridging loan is far lower than the cost of missing a time-sensitive opportunity entirely.

How to Reduce Your Bridging Loan Costs

Use a whole-of-market broker: Panel-restricted lenders won't show you the best rates. An independent broker with relationships across 50+ lenders will find better pricing than going direct.
Negotiate the arrangement fee: On loans above £500,000, arrangement fees are often negotiable — particularly if you're a repeat borrower or the deal is clean and straightforward.
Keep the term short: Every extra month costs money. Have your exit lined up before you complete — don't take a 12-month loan if you can exit in 6.
Lower the LTV: Lower LTV = lower rate. Putting in more equity reduces both the rate and the loan balance on which interest accrues.
Check for exit fees: A slightly higher monthly rate with no exit fee often costs less overall than a lower rate with a 1% exit fee, depending on your term.
Choose retained over rolled if exiting early: If you're confident of a short exit, retained interest means you pay only for the months you use — and get a refund on early repayment.

Common Bridging Loan Cost Mistakes

Comparing only the monthly rate: Two loans at 0.75%/month can have very different total costs depending on fees, interest method, and exit charges.
Underestimating the term: Planning on 6 months and running to 10 adds 4 months of rolled interest that wasn't in the original budget. Always stress-test your timeline.
Forgetting lender legal fees: Borrowers often budget for their own legal fees and forget the lender's — an extra £2,000–£3,000 that comes as a surprise on completion.
Not reading the offer letter carefully: Some lenders include penalty clauses, minimum interest periods, or administration fees that aren't in the initial term sheet.

Frequently Asked Questions

What are the typical costs of a bridging loan?

Monthly interest (0.55%–1.25%/month), arrangement fee (1%–2%), valuation (£500–£2,000), lender and borrower legal fees (£2,500–£5,000 combined), and sometimes an exit fee (0.5%–1%). Total cost on a 6-month £500k loan typically £35,000–£65,000.

How is bridging loan interest charged?

Monthly on the outstanding balance. Three methods: rolled (added to balance, paid on exit), retained (deducted upfront), or serviced (paid monthly). Rolled and retained are most common for property investors.

What is an arrangement fee on a bridging loan?

A one-off lender charge for setting up the facility — typically 1%–2% of the gross loan. Usually deducted from the advance at completion. On a £500,000 loan at 1.5%, that's £7,500.

Do all bridging loans have exit fees?

No — many charge no exit fee. Where they apply, they're typically 0.5%–1% on redemption. Always compare total cost (rate + fees + exit) rather than just the headline rate.

Can bridging loan costs be added to the loan?

Yes — the arrangement fee is typically deducted from the gross advance, and interest can be rolled into the balance. Valuation and legal fees are usually paid separately. Your net advance will be less than the gross loan amount.

How can I reduce my bridging loan costs?

Use a whole-of-market broker, negotiate the arrangement fee on larger loans, keep the term as short as possible, lower your LTV, check for hidden exit fees, and consider retained interest if exiting early.

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Bridging Loan Costs Explained — Complete UK Guide 2026