How much do Bridging Loans cost?
Bridging loans are typically short term options which are “interest only” loans. The terms are usually 12 months in length but there are some options of 24 months to the right applicants.
There are various types of Bridging loans but the most common is an interest only term with the interest being paid monthly. The second most common is to front load the interest and make no payments for the duration of the term. When the balance is due to be repaid it will include the capital and interest in full.
What are the Fees for a Bridging Loan?
The three main fees involved in Bridging Loans are:
- Set Up – Usually about 3% of the loan
- Interest – Usually about 2% of the loan
- Exit Fee – Usually about 1% of the loan
- Other fees may be applicable e.g valuation fees, solicitors fees
Why use a Bridging Loan?
There are various reasons why Bridging Loans are so popular. They could be used for a variety of reasons – some are listed below
- Traditional finance is unavailable and so a short term bridge to remedy the issue is needed.
- The applicant may have a poor credit history and therefore not suitable for funding.
- The property may not be suitable for a standard mortgage and may require work to completed.
- Funding may be required for a Businesses cashflow for a short term and so a Bridging loan is the perfect solution.
- Properties purchased at auction require a quick completion and so using a Bridging loan helps to get the property in the buyers name quickly.
- A Bridging Loan can help buy some time to put a traditional mortgage in place which traditionally can take some time.
Who would qualify for a bridging loan?
- Clients with equity in their property.
- Clients who can demonstrate affordability.
- Companies or individuals
Costs Upfront
A major part of deciding if a Bridging Loan can be provided is the property value. Until this has been completed then it is unknown as to how much funding can be generated.
A valuation of the property is required and this is usually the only upfront cost. A surveyor would be required to value the property – the cost of the survey can depend on the property type, location and individual surveyors.
As a rough estimate a valuation is usually around £150 per £100,000 of value of the property.
Are there any early redemption fees or exit fees?
This would depend on the individual Bridging Loan provider. Some will charge a fee and some may limit this to say one months interest payment.
Example of costs
Typically a Bridging Loan provider will charge around 1.5% – 2% per month on the funding provided. A rate card from one of our lenders has been provided below to show the types of fees for a Bridging Loan.
| Loan to Value | Low Rate | Valuation Only | ||
| 1st Charge | 2nd Charge | 1st Charge | 2nd Charge | |
| <40% | 0.65% | 0.80% | 1.00% | 1.25% |
| <50% | 0.75% | 1.00% | 1.10% | 1.25% |
| <60% | 0.85% | 1.10% | 1.25% | 1.35% |
| <0.65% | 0.85% | 1.10% | 1.25% | 1.35% |
| <70% | 0.95% | 1.15% | 1.45% | 1.50% |
How to apply for a Bridging Loan?
Applying for a Bridging Loan is very simple. Click the link below or call 0161 8211478 to speak with one of our specialists.
Finally as members of the Financial Intermediary and Broker Association you can be assured of a great service. https://www.fiba.org.uk/
Finance approval is subject to status and terms and conditions apply.
