The True Cost of Bridging Finance — It's Not Just the Rate

Ask most borrowers what a bridging loan costs and they'll quote you a monthly rate. 0.65%. 0.85%. Maybe 1.1%. That number matters, but it's only one line on the invoice. The total cost of a bridging facility is determined by at least half a dozen factors — and the cheapest headline rate doesn't always produce the cheapest deal.

The Components You're Actually Paying

Every bridging loan has a cost stack. Here's what's in it:

• Monthly interest rate. Typically 0.40% to 1.2% per month depending on LTV, asset type, and borrower profile. On a £500k loan at 0.75% per month, that's £3,750 per month — or £45,000 annualised.
• Arrangement fee. Usually 1% to 2% of the gross loan. On £500k, a 2% fee is £10,000. This is often added to the loan (so you pay interest on it too).
• Exit fee. Some lenders charge 1% to 1.5% on redemption. Others don't charge at all. This is one of the most overlooked costs in bridging.
• Valuation fee. The lender's valuer, not yours. Typically £500 to £2,500 depending on asset complexity and value.
• Legal fees. You pay your own solicitor and the lender's solicitor. Budget £1,500 to £5,000 for both sides combined, depending on deal complexity.
• Broker fee. Typically 1% of the loan, though this varies. A good broker should save you more than their fee through better structuring and lender selection.

Why the Cheapest Rate Can Be the Most Expensive Loan

Here's a real-world comparison. Two lenders quoting on the same £500,000 bridge over 9 months:

Lender B's rate is 27% higher — but the total cost is £3,800 less. The exit fee alone on Lender A wipes out the rate advantage. This isn't a contrived example. We see this pattern regularly.

Rolled-Up Interest: The Hidden Benefit

Most bridging loans use rolled-up interest — no monthly payments, with everything settled on exit. This is a significant cashflow advantage, particularly for developers and investors who need capital working in the project, not servicing debt. But it means the interest compounds slightly, because arrangement fees added to the loan also attract interest.

On a £500k loan with a 2% arrangement fee added, you're actually paying interest on £510,000. Over 9 months at 0.75%, that's an extra £675. Not dramatic, but worth understanding when you're comparing deals.

Term Matters More Than You Think

A bridge you repay in 4 months costs roughly half the interest of one you hold for 8 months. That sounds obvious, but it has a real practical consequence: a slightly more expensive lender who completes in 10 days rather than 6 weeks could actually save you money overall if it means you exit sooner.

Speed of completion also matters when you're buying competitively. Losing a deal because your lender took too long has an opportunity cost that doesn't appear on any statement.

How to Compare Properly

When evaluating bridging options, always ask for the total cost of borrowing over your expected term, including all fees. Any broker or lender who won't give you this number upfront is one to be cautious about.

Our bridging calculator is built to show exactly this — the total cost including arrangement fees, interest, and exit charges, not just the headline rate. And our rates page breaks down what drives pricing so you can understand where your deal sits.

The best-structured deal isn't always the cheapest rate. It's the one that costs the least overall, completes on time, and gives you certainty that the money will actually be there when you need it.