The Cost of a Bridging Loan
When it comes to Bridging Loans, there are a number of costs to consider. Bridging loans can be a lifeline in tight financial situations, but they can also be expensive. Here our Bridging Loan Solicitors break down the the costs you might face.
If you already understand how Bridging Loan costs are structured, you may want to jump down to our Bridging Loan Calculator. It’s a comprehensive calculator that covers interest rates, legal fees and stamp duty costs.
What Exactly is a Bridging Loan?
A bridging loan is a short-term loan designed to “bridge” the gap between buying a new property and selling your existing one. Bridging Finance can also be used in cases of buying some types of new properties and they can be particularly useful to finance property renovations and development. Bridging loans are a way to quickly access funds when you need to act fast, but you need to be fully aware of the true cost of a bridging loan before proceeding.
For more information, you may want to watch our video: What is a bridging loan?
The Breakdown of Bridging Loan Costs
Interest Rates – Bridging loans usually come with higher interest rates than standard mortgages because they’re short-term and involve more risk for the lender.
Interest rates typically range from 1% to 2% per month. For example, a £100,000 loan at 1% per month would cost you £1,000 in interest each month.
Arrangement Fees – This is a one-time fee the lender charges to set up your loan. It covers the cost of processing your application and getting the loan in place.
Arrangement fees are usually 1% to 2% of the loan amount. For a £100,000 loan, this would be £1,000 to £2,000.
Exit Fees – Some lenders charge an exit fee when you repay the loan, especially if you repay it earlier than planned. It’s a fee for closing the loan before the agreed term ends.
Exit fees can vary, but they’re often around 1% of the loan amount.
Valuation Fees – Before lending, the lender may require a property valuation to ensure it’s worth the amount you’re borrowing. You typically pay for this valuation.
Valuation fees can range from £200 to £1,000. Fees are generally larger for properties of higher value.
Default Fees – Default fees are penalties that apply if you miss a payment or fail to repay the loan on time. These fees can be substantial and may include higher interest rates, additional charges, or legal costs.
Default fees can vary significantly depending on the lender and the terms of your loan, but they can add hundreds or even thousands of pounds to your overall cost. Some lenders may be more lenient towards late payments, and others may apply additional late payment fees on top of the default fees.
Legal Fees
Another cost to consider when it comes to Bridging Loans are the legal fees involved. The extent of these fees depends on factors such as the amount being borrowed and the lender you use. Some of the typical fees you may be dealing with are as follows:
- Solicitor’s Fees – In most cases a borrower may need a bridging loan solicitor to handle the bridging loan conveyancing, review the terms of the loan agreement and ensure the transaction is legally sound
- Bridging Lender Solicitor fees – the Bridging Lender you use will have a solicitor of their own, and so these fees cover the work of that solicitor on behalf of your lender. This could involve a number of tasks including: conducting property searches, reviewing the borrower’s legal documentation, preparing the loan agreement, and ensuring that the lender’s interests are protected
- Administration Fees – this includes various tasks, for example processing the loan, dealing with additional documentation and title insurance
- Disbursements – these are costs that the solicitor may incur involving standard checks, possibly Land Registry Fees, etc.
- Stamp Duty Land Tax (SDLT) – in the case of the loan being used for property purchase, stamp duty may be an applicable cost.
It is important to be aware that this is not an extensive list of the costs involved. It is vital to consider your individual case, and how this may reflect on the costs you may incur. These fees can quickly add up; therefore, it is recommended that you have an in-depth conversation with your lenders and solicitors before proceeding with a decision However, if you would like an idea of bridging loan costs, our bridging loan calculator will give you an estimate of the likely fees you will face.
Mortgage Lender Panels
Trusted Residential Conveyancing
We’re a six-partner practice accredited by the Law Society’s Conveyancing Quality Scheme (CQS) with £3 million professional indemnity insurance. Our quality service is recognised by our admission onto the residential conveyancing panels of major mortgage lenders, including bridging loan lender specialists.
The Bridging Loan Calculator (including Stamp Duty Calculations)
Tips to Keep Costs Down
Bridging loans can be costly, but there are ways to manage these expenses:
- Choose the Right Type of Loan: If you know when your property will sell, opt for a closed bridging loan to benefit from lower interest rates.
- Shop Around: Different lenders offer different rates and fees. Compare offers to find the best deal for your situation.
- Negotiate Fees: Some fees, like arrangement and exit fees, may be negotiable. It’s worth asking your lender if they can reduce or waive certain charges.
- Plan Ahead: To avoid default fees, make sure you have a clear plan for repaying the loan on time.
Title Split
A Title Split (in simple terms) is when you split a larger property into multiple different units and arrange new mortgages for each of these new units. This can help you pay back your Bridging Loan in the case where you do not plan to live in the new property but rather convert it. Splitting your title may significantly improve the value of your investment asset, and you may be able to create new leases for the new properties you have created.
Why Title Splits are Popular using Bridging Loans
- Speed: Bridging loans are known for their quick approval times, making them ideal when timing is crucial, such as when a property needs to be acquired and developed rapidly.
- Flexibility: Bridging loans are often more flexible than traditional loans, accommodating the complexities of title splits and phased developments.
- Short-Term Nature: Since bridging loans are short-term, they are well-suited to projects like title splits where the investment can be realized quickly through sales or refinancing.
In order to ensure your new mortgages are in place before your bridging loan is due to be repaid, it may be wise to take a mortgage from a specialist lender who provides financial solutions specifically designed for investors using a bridging loan. While many mortgage advisors will not be able to advise on these types of mortgages, our expert mortgage brokers have an in-depth understanding of the options available and can recommend you a loan which meets your requirements.
Our Bridging Lenders
Bridging Loans are provided by specialist lenders who can provide you with short term funding. Our six-partner practice at Starck Uberoi Solicitors can act on behalf of borrowers, involving most bridging lenders including: Aspen Bridging, CPF One Limited, Greenfield Mortgage Bridging, Lendinvest Bridging, Market Harborough Building Society, Mint Property, MT Finance, Octopus Real Estate, Prospect Capital Limited, Shawbrook Bank, SOMO, Together Finance, West One Bridging.
Is a Bridging Loan Right for You?
Bridging loans can be incredibly useful when you need quick access to funds, but they’re not without their costs. Understanding the types of bridging loans and the associated expenses can help you make an informed decision. Always weigh the costs against your needs and consider all your options before proceeding.
How Starck Uberoi can help
Our ‘One Stop Shop’ approach can save you valuable time in finding a bridging loan which is right for you, all while making sure you receive bespoke legal advice from to guide you through the bridging loan conveyancing process. If a bridging loan sounds like an effective solution for you,we can recommend trusted morgage advisors who specilaise in bridging loan finance.
Alternatively if you already have a bridging loan arranged and require bespoke legal advice see our online conveyancing quote calculator for a free online no-obligation quote. Or, to book an appointment please call 020 3805 8554.
Our Offices
Our Brentford Solicitors, are located on the High Street in a grand three-story building, just a short distance from Brentford County Court. Our Belgravia solicitors are located Just a 5-minute walk from Victoria tube station in Grosvenor Gardens. Our Ealing solicitors are only a short walk from both Ealing Broadway and South Ealing and our Richmond Solicitors have the pleasure of overlooking the picturesque Richmond Green. Finally, our Solicitors in Canterbury are located in the within the UNESCO World Heritage Site of Canterbury Cathedral. Our partner, Raminder Uberoi, can also offer a Notary Public Service at any of our London offices.
Bridging Loan : FAQ
How do I get a bridging loan?
To get a bridging loan, you should approach a specialist bridging lender or a
mortgage broker who can access the bridging market. You will need to provide
details of the property being used as security, your exit strategy (how you plan
to repay the loan), and supporting financial documentation. A valuation of the
security property will be required, and you must instruct a solicitor to carry
out the legal conveyancing work. Once the valuation and legal work are complete,
funds can typically be released within two to four weeks. Starck Uberoi
Solicitors acts for borrowers across a wide range of specialist bridging lenders
and can provide the legal support required to complete your bridging loan quickly.
Are bridging loans a good idea?
Bridging loans can be a good idea when you need fast, short-term access to
finance and have a clear plan for repaying the loan. They are particularly useful
for breaking a property chain, purchasing a property at auction, funding
renovation or development projects, or acquiring a property quickly when a
standard mortgage is not available in time. However, because interest rates are
significantly higher than those of traditional mortgages — typically 0.5% to 2%
per month — a bridging loan is best used as a short-term solution with a viable
exit strategy, such as the sale of a property or a remortgage. Without a clear
exit plan, the costs can escalate rapidly.
How long does a bridging loan take?
A bridging loan typically takes between two and four weeks to complete from
application to drawdown. This is considerably faster than a traditional mortgage,
which can take several months. The speed of completion depends on how quickly the
property valuation can be arranged, how promptly solicitors complete the legal
work (including property searches and reviewing loan documentation), and how
efficiently the borrower provides the required documentation. In some cases,
where all parties act quickly, a bridging loan can complete in as little as five
to ten working days.
How much is a bridging loan?
The total cost of a bridging loan includes several components: monthly interest
of 0.5% to 2% on the loan amount; an arrangement fee of 1% to 2% of the loan
value; a potential exit fee of around 1% when the loan is repaid; a property
valuation fee of between £200 and £1,000; and legal fees covering both your
solicitor and the lender’s solicitor. For example, on a £200,000 bridging loan
at 1.5% per month over six months, the interest alone would amount to £18,000,
before arrangement, exit, valuation, and legal fees are added.
Are bridging loans expensive?
Yes, bridging loans are more expensive than standard mortgages. Monthly interest
rates of between 0.5% and 2% equate to an annualised cost of approximately 6%
to 24%, which is significantly higher than typical residential mortgage rates.
In addition to interest, borrowers must factor in arrangement fees (typically
1–2% of the loan), exit fees (around 1%), valuation fees (£200–£1,000), and
legal costs. These costs make bridging loans suitable only as a short-term
financing tool, used when speed or flexibility is essential and a clear,
achievable exit strategy is in place.
Can you get a bridging loan with bad credit?
It is possible to obtain a bridging loan with bad credit. Unlike traditional
mortgages, bridging loans are primarily assessed on the value of the security
property and the viability of the borrower’s exit strategy, rather than on
credit history alone. Specialist bridging lenders are often more flexible than
high-street banks when it comes to adverse credit, including county court
judgments (CCJs), missed payments, or previous bankruptcies. However, a poor
credit history may result in higher interest rates or stricter loan-to-value
requirements. It is advisable to seek independent financial advice and to work
with a specialist broker who has access to the full bridging market.
Are bridging loans regulated?
Whether a bridging loan is regulated depends on how the property is to be used.
Bridging loans secured against a property that is, or will be, occupied by the
borrower or a close family member are regulated by the Financial Conduct
Authority (FCA) under the Consumer Credit Act and the Mortgage Credit Directive.
Regulated bridging loans provide greater consumer protections, including the
right to a cooling-off period and access to the Financial Ombudsman Service.
Bridging loans used for commercial, investment, or property development purposes
are generally unregulated. It is important to confirm the regulatory status of
your loan before proceeding, as this affects the protections available to you.
Do I need a deposit for a bridging loan?
Most bridging lenders will lend up to 70% to 75% of the property’s open market
value, meaning you will typically need equity or a deposit of at least 25% to
30% of the property’s value. This ratio is known as the loan-to-value (LTV). In
some cases, lenders may permit a higher LTV if additional security is provided,
such as a second charge over another property. If you are purchasing a new
property using a bridging loan, you will need to fund the remaining 25–30% from
your own resources or from the proceeds of an existing property sale.
What is the interest rate on a bridging loan?
Bridging loan interest rates in the UK typically range from 0.5% to 2% per
month, depending on the lender, the loan-to-value ratio, the type of loan (open
or closed), and whether it is a first or second charge loan. First charge
bridging loans generally attract lower rates than second charge loans because the
lender has priority over other debts if the borrower defaults. Closed bridging
loans — where there is a fixed repayment date — also tend to carry lower rates
than open bridging loans. On an annualised basis, bridging loan interest rates
equate to approximately 6% to 24% per annum.
Are property development finance and bridging loans the same?
Property development finance and bridging loans are related but distinct
products. Both are forms of short-term secured finance, but they are structured
differently. A bridging loan is typically drawn as a single lump sum and is used
to bridge a gap between two transactions — for example, between purchasing a new
property and selling an existing one. Development finance is specifically
designed for renovation or construction projects and often includes a drawdown
facility, releasing funds in stages as the project progresses, so borrowers only
pay interest on the amounts drawn at each stage. Development finance suits
heavier construction projects, while bridging loans are more suited to purchases,
chain breaks, and lighter refurbishments.
What is the interest rate on a bridging loan?
Bridging loan interest rates in the UK typically range from 0.5% to 2% per
month, depending on the lender, the loan-to-value ratio, the type of loan (open
or closed), and whether it is a first or second charge loan. First charge
bridging loans generally attract lower rates than second charge loans because the
lender has priority over other debts if the borrower defaults. Closed bridging
loans — where there is a fixed repayment date — also tend to carry lower rates
than open bridging loans. On an annualised basis, bridging loan interest rates
equate to approximately 6% to 24% per annum.
Do banks give bridging loans?
Most bridging loans in the UK are provided by specialist lenders rather than
high-street banks. While some banks do offer bridging finance, the bridging
market is predominantly served by specialist lenders who can act more quickly,
offer more flexible terms, and accommodate a wider range of borrower
circumstances. Specialist lenders active in the UK bridging market include MT
Finance, Together Finance, Shawbrook Bank, Octopus Real Estate, LendInvest,
West One, and others. Starck Uberoi Solicitors is on the panel of numerous
specialist bridging lenders and can act for borrowers across the bridging market.
How Starck Uberoi can help
Our ‘One Stop Shop’ approach can save you valuable time in finding a bridging loan which is right for you, all while making sure you receive bespoke legal advice from to guide you through the bridging loan conveyancing process.
Our partner company ‘Starck Uberoi Wealth’ specialises in helping you find the optimal financial solutions for you. We always work in our client’s best interests and are determined to provide the best service for our clients, no matter their situation. If a bridging loan sounds like an effective solution for you, please see our mortgage advisors.
Alternatively if you already have a bridging loan arranged and require bespoke legal advice see our online conveyancing quote calculator for a free online no-obligation quote. Or, to book an appointment please call 020 3805 8554. Our offices are based in Brentford, Ealing, Richmond, Canterbury and London Belgravia. For an appointment at any of our offices, email us at solicitor@starckuberoi.co.uk or call 020 3805 8554.
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At Starck Uberoi we are committed to providing you with efficient and clear legal advice. We understand that finding a reliable conveyancer can be a time consuming and difficult task; to make it easier for you, we provide a free, online conveyancing quote calculator to save you time on your search.
