Bridging finance is priced differently from a mortgage: costs are quoted monthly rather than annually, there are several distinct fee types, and the way interest is structured affects how much cash you need on day one. Understanding the full picture before you speak to a lender is the difference between a deal that works and one that falls apart at the numbers stage.

This article breaks down every cost component, explains what drives the price up or down, and gives you a worked example so you can run the numbers on your own deal. If you want to understand how quickly a bridge can complete once the cost decision is made, the bridging loan timeline article covers the mechanics from application to drawdown.

The Core Cost Components

A bridging loan typically carries five distinct cost lines:

Interest rate: quoted per month (e.g. 0.50% a month). This is the biggest variable and is set based on LTV, property type, exit clarity, and which lenders you can reach. Development exit is priced case by case. See the live rates page for current product-by-product figures.
Arrangement fee: typically 1–2% of the gross loan, charged by the lender. Paid on completion and can be added to the loan (which means you pay interest on it for the loan term). Some lenders waive or discount it for brokers with volume, which is one reason a broker can pay for itself.
Exit fee: typically 0–1% of the gross loan. Not all lenders charge one; some charge it only on early redemption, some always, some never. It is in the offer letter. Read it before you sign, because a 1% exit fee on a £500,000 loan is £5,000 that can appear as a surprise on redemption day.
Legal and valuation costs: bridging lenders require their own solicitor (separate from yours) and an independent RICS valuation. Valuation typically costs nil to about £100 for a desktop valuation and up to about £2,000 for a full one, plus VAT, on a loan of about £200k, depending on the property, and legal costs run about £1,500–£2,000 plus VAT for each side on a loan of about £200k (more on larger or complex loans). These are incurred regardless of whether the loan completes; budget for them before instructing.
Broker fee: ours is generally 1% of the gross loan, paid on completion. A well-structured deal, placed with a lender that wants it, tends to be priced well, particularly for adverse credit or complex cases where the right lender selection makes a material difference to rate.

How Interest Is Structured: Retained, Rolled or Serviced

The interest rate is one number; how it is structured determines what it means for your cashflow.

Retained interest: The lender deducts the full term's interest from the advance on day one. You receive less cash but make no monthly payments. Suits purchases where the lender wants the interest set aside from day one. Net advance = gross loan minus arrangement fee minus retained interest.
Rolled (compounded) interest: Interest accrues and compounds monthly; everything is paid on redemption. You receive the full advance on day one but the redemption sum is higher than with retained. Typically available to borrowers with clean credit and strong exits.
Serviced (monthly payments): You pay interest monthly from your own funds. Less common; mainly used for longer-term bridges where the borrower has strong income and wants to reduce the total redemption amount.

The key practical point: retained and rolled interest both affect the total cost but in different ways. Retained reduces your day-one cash; rolled increases your redemption amount. Neither is cheaper in isolation; the deciding factors are your cashflow position and the term. A borrower who needs maximum net proceeds on day one will prefer rolled; one who wants a predictable, lower redemption figure may prefer retained.

Worked Example: What a £500,000 Bridge Costs

To make the components concrete. Inputs: £500,000 loan, 70% LTV (security value £714,286), 9-month term, standard residential, clean credit, confirmed sale exit, interest rolled up at 0.76% a month, the average published rate across 42 lenders, as at 25 October 2026. Bridging rates start from 0.50% a month (first charge, under 50% loan-to-value, straightforward cases).

Cost item	Basis	Amount
Interest (0.76% a month, rolled up, 9 months)	0.76% × £500,000 × 9	£34,200
Arrangement fee (1%; lender fees typically 1–2%)	1% × £500,000	£5,000
Valuation	Estimate	£2,500
Legal costs (both sides)	Estimate	£4,000
Our fee (1%)	Generally 1% of the gross loan, paid on completion	£5,000
Total cost of borrowing		£50,700

Effective cost over the term, interest and fees together: about 10% of the loan over 9 months. Simple annualised equivalent: about 13.5% a year (not a regulated APR). That looks high next to a mortgage, but the absolute number, £50,700 over 9 months on a £500,000 loan, is what matters to the deal. Whether that cost sits inside the profit margin on a development or purchase determines viability.

Note the retained interest mechanics: if a lender retains the interest instead of rolling it up and you need £500,000 to land in your account, you would need to gross up the loan to account for the retained interest and arrangement fee deducted on day one. The calculator lets you model this on your own figures.

What Drives the Rate Up, and What Brings It Down

The lender is pricing the probability that they get their money back and when. These are the levers:

LTV: the single biggest lever. At ≤65%, most lenders compete aggressively; at 70–75%, a smaller group; at >75%, specialist placement is required. Each 5% LTV band typically adds 0.05–0.15% a month to the rate.
Exit quality: a confirmed sale under offer (SSTC) or a refinance with an agreement in principle from the receiving lender produces a tighter rate than "I plan to sell in 6 months" with no supporting evidence. The lender is pricing the uncertainty, not the intention.
Property type: standard residential gets the tightest rate. Commercial, mixed-use, land and heavy-refurb security each carry a premium, mainly because the lender's resale position on enforcement is less liquid.
Adverse credit: as covered in the adverse credit article, most adverse credit carries 0.1–0.3% a month above standard: a fixed premium rather than a deal-breaker. At ≤65% LTV on clean assets, adverse credit often disappears from the pricing altogether.
Term: most lenders are indifferent to term within 3–12 months. Sub-3-month completions sometimes carry a minimum interest charge (3 months' interest regardless of when you redeem). Beyond 12 months, pricing may step up.
Broker relationship: lenders price tighter for brokers with volume and track record. The rate floor shown on the rates page is the published card; a well-packaged case placed by a volume broker can beat that floor.

Common Cost Mistakes to Avoid

Comparing only the interest rate. Two loans at 0.55% a month can differ by £5,000 on a £500,000 deal if one lender charges a 2% arrangement fee and the other charges 1%. Always compare total cost of borrowing, not the headline rate.
Forgetting the net advance. If you need £250,000 to land in your account, a retained-interest structure means you need a larger gross loan, because the arrangement fee and retained interest come off the top before you see a penny. Model the net advance you need, then work back to the gross.
Underestimating legal and valuation costs. These are non-refundable if the deal falls through. Get a firm estimate from the lender's solicitor before you commit.
Ignoring the exit fee. It is in the offer letter; read it before you sign. A 1% exit fee on a £500,000 loan is £5,000; on a short-term bridge, that can exceed a month's interest.

Run Your Own Numbers

Put your own figures through the calculator to see the total cost, net advance and redemption sum, and compare them with today’s product-by-product pricing on the rates page. If you’d like a cost indication on your actual case, arrange a call.

Bridging Loan Costs Explained: What You'll Actually Pay in 2026