Are bridging loans expensive?

Bridging loans look expensive on paper and are often cheaper than the alternative in practice. The headline monthly rate is higher than a mortgage, but you only hold the money for months, so the total cost is small relative to the deal it protects. A loan at 1% per month held for three months costs roughly 3% of the amount borrowed, not 12% a year.

The honest answer is that price depends on the term, the loan-to-value, the property, and the strength of your exit. A clean, low-LTV case with a solid exit prices near the bottom of the range. A complex or higher-risk case prices higher. Comparing a monthly bridging rate to an annual mortgage rate is the mistake that makes bridging look dearer than it is.

This page explains what bridging actually costs and how to judge whether it is good value for your situation. It is information, not advice. For the full product, costs and how to get indicative terms, see our bridging loans page.

What bridging loans actually cost

For most deals, indicative monthly interest runs from 0.50% to 1.10%. The cheapest published rates sit around 0.44% per month, but those are reserved for low-LTV, clean-exit cases with strong borrower profiles. Most real-world deals land between 0.55% and 0.95% per month.

Interest is only one line on the bill. Plan for the full picture:

• Arrangement fee. Usually 1% to 2% of the loan, often added to the advance rather than paid in cash.
• Valuation fee. Paid up front to a RICS valuer. Indicatively £400 to £2,500 for standard property, higher for commercial or large schemes.
• Legal fees. Your own and the lender’s, typically £750 to £3,500 for standard cases.
• Exit fee. Some lenders charge 0% to 1% on redemption. Many waive it.

A broker fee may also apply, disclosed in writing before you commit. Every figure here is indicative. The lender confirms the real numbers on application once it has seen the property and your file.

Why the monthly rate is the wrong number to judge

This is where most people misread the cost. Bridging interest is quoted per month because you hold the money for months, not decades. Multiplying that monthly rate by twelve to get an annual figure tells you almost nothing useful, because almost nobody holds a bridge for a full year.

What matters is the total cost over the time you actually borrow. Hold a 1% per month loan for three months and the interest is roughly 3% of the loan. Hold it for two months and it is closer to 2%. The shorter your exit, the cheaper the money. This is the opposite of how a mortgage works, where a longer term is what makes the payments affordable.

So the right question is not “what is the rate?” It is “what is the total cost over my term, set against what the deal is worth to me?”

A worked example

Numbers make this concrete. Say you borrow £500,000 at 0.85% per month and hold it for three months while you complete a refinance.

The interest comes to about £12,750. Add a 1.5% arrangement fee of £7,500, a valuation around £1,200, and legal costs near £2,000. The all-in cost of the finance is roughly £23,450 over three months, before any broker fee.

That is the figure to weigh. Set £23,450 against the deal it makes possible: the auction lot you would otherwise lose, the chain that would otherwise collapse, the refurbishment that turns an unmortgageable property into a rentable asset. For most investors, the cost of the bridge is small next to the cost of the deal falling through.

How the interest is handled changes the cash impact

Bridging interest can be paid three ways, and which one applies affects how much cash you need during the term. The lender confirms the method on application:

• Serviced monthly. You pay the interest each month, like a mortgage.
• Rolled up. Interest accrues and is added to the balance, then cleared in full at the end. Nothing leaves your pocket during the term.
• Retained. The lender holds the interest for the term back out of the advance on day one, so you draw down slightly less.

Rolled-up and retained interest matter most when the property produces no income during the loan, such as a refurbishment. You are not asked to service a loan from a property that is not yet earning. That can make a bridge far easier to carry than the headline rate suggests.

What makes one bridge cheaper than another

Five things move your price, and several of them are within your control.

Loan-to-value is the biggest lever. Lower LTV almost always means cheaper money, because the lender carries less risk. Most bridging caps around 75% LTV, and the rate steps down as you come below it.

The exit strategy is the second. A clear, evidenced exit, a refinance already in principle or a sale already agreed, reads as low risk and prices accordingly. A vague exit prices higher or gets declined.

Property type, term length, and whether the case is regulated or unregulated round out the picture. Standard residential security in a strong location is cheaper than unusual construction or a development site. The cleaner the case, the cheaper the rate. This is exactly where a broker earns its keep, by matching your case to the lender most comfortable with it rather than the first one to say yes.

Is bridging good value? It depends on the alternative

A bridge is expensive money in isolation and good value when the alternative is worse. The comparison that matters is not bridging versus a mortgage, because they solve different problems. It is bridging versus losing the deal.

Lose an auction purchase and you forfeit the deposit, often 10% of the price. Let a chain collapse and you may lose the onward property and the costs already spent on it. Miss a window to buy below market value and the opportunity is gone. Measured against those outcomes, a few thousand pounds of short-term interest is often the cheaper path.

Bridging is the wrong tool if you want to borrow slowly over many years. That is a term mortgage. Used for its actual purpose, short-term timing, the cost is usually proportionate to the value it unlocks.

Frequently asked questions

See the real numbers for your deal

The only way to know whether bridging is expensive for your situation is to price the actual deal. Tell us the property, the loan size, the purpose and your exit, and a broker will frame the total cost over your term and come back with indicative terms inside 24 hours. There is no fee to find out and no impact on your credit file when you ask for a quote.

For the full product detail, costs and lender comparison, read our bridging loans page. This guide is information, not regulated advice. A qualified adviser confirms the regulatory position of your specific case on the call.