What are the main costs of a bridging loan?

The main costs are: monthly interest (charged on the loan balance), arrangement fee (typically 1–2% of the loan), valuation fee (£0 for AVM, £250–800 for RICS), and legal fees (both the lender's solicitor and your own). Exit fees are charged by some lenders but not all. AF Credit charges no exit fee.

How is bridging loan interest calculated?

Bridging loan interest is calculated monthly on the outstanding loan balance. At 0.85% per month on a £200,000 loan, the monthly interest cost is £1,700. Over a 6-month term the total interest is £10,200. Interest is typically retained (deducted from the loan advance upfront) or rolled up (added to the balance and paid at redemption) rather than paid monthly.

What is a bridging loan arrangement fee?

An arrangement fee (also called a facility fee) is charged by the lender for setting up the loan. It is typically 1–2% of the net loan amount. On a £200,000 loan at 2%, the arrangement fee is £4,000. It is usually deducted from the loan advance rather than paid separately.

Do bridging loans have exit fees?

Some bridging lenders charge an exit fee of 0.5–1% of the loan amount when the loan is repaid. AF Credit does not charge an exit fee. Always check the term sheet carefully for exit fees before accepting a loan offer.

How much does a bridging loan valuation cost?

An AVM (automated valuation) costs £0 and is available at 60% LTV or below on standard residential property. A desktop valuation (RICS, no site visit) typically costs £250–400. A full RICS physical inspection typically costs £400–800 depending on property size and location. Valuation costs are paid by the borrower and are usually non-refundable.

What are the legal costs on a bridging loan?

The borrower typically pays two sets of legal fees: their own solicitor's costs and the lender's solicitor's costs (the lender requires the borrower to fund their legal costs). On a straightforward residential bridging loan, budget £1,500–3,000 total for both sets of solicitor fees. Complex cases, multi-security structures, or commercial properties cost more.

Can I roll up bridging loan interest?

Yes. Most bridging loans allow interest to be retained (deducted upfront from the advance) or rolled up (added to the outstanding balance and paid at redemption). Neither approach requires monthly cash payments. Retained interest means you receive a smaller net advance; rolled-up interest means the balance grows over time. The total cost is broadly similar either way.

What is the total cost of a bridging loan over 6 months?

On a £200,000 bridging loan at 0.85%/month for 6 months: interest = £10,200; arrangement fee (2%) = £4,000; valuation (full RICS) = approx. £600; legal fees = approx. £2,000. Total cost approximately £16,800 — equivalent to 8.4% of the loan amount over 6 months. Shorter terms and lower rates reduce this significantly.

Is bridging loan interest tax deductible?

For property investors and developers borrowing via a limited company, bridging loan interest is generally deductible as a business finance cost, reducing the company's taxable profit. For individuals holding rental properties, the interest deductibility rules changed with the introduction of Section 24 — speak to a tax adviser for your specific position. This guide does not constitute tax advice.

How do bridging loan costs compare to a mortgage?

Bridging loan monthly rates (0.79%–0.99%) are higher than mortgage rates on an annualised basis. However, bridging loans are short-term instruments and the total cost over a 3–6 month term is often modest relative to the value of the transaction being funded. The relevant comparison is not rate vs rate — it is total bridging cost vs the cost of missing the opportunity, losing a deposit, or failing to complete.

What rate does AF Credit charge?

AF Credit's rates start from 0.79% per month for standard residential at 60% LTV with AVM valuation. Rates increase with LTV, property complexity and borrower profile. The rate is confirmed in the indicative terms issued on the day of enquiry — there are no hidden adjustments between indicative terms and formal offer.

What Does a Bridging Loan Cost? | Rates, Fees & Worked Examples

The four cost components

1. Monthly interest

Bridging loan interest is quoted as a monthly rate — typically 0.79% to 0.99% per month for standard residential property. This is charged on the outstanding loan balance for each month (or part month) the loan is outstanding.

Interest is almost never paid monthly in the traditional sense. Instead, it is either:

Retained — the full term's interest is deducted from the loan advance upfront. You receive a smaller net advance but owe only the net loan at redemption.
Rolled up — interest accrues on the balance and is paid at redemption alongside the principal. The balance grows over time.

Both methods arrive at broadly the same total cost. Retained interest is more common for shorter terms (3–6 months); rolled-up is common for longer terms where the exit is less predictable.

2. Arrangement fee

A lender arrangement fee (also called a facility fee) is charged for setting up the loan. It is typically 1–2% of the net loan amount and is usually deducted from the advance rather than paid separately. On a £200,000 loan at 2%, the arrangement fee is £4,000.

Some lenders charge less but make it back through higher rates or exit fees. Compare the full cost — rate, fees and exit — not the headline rate alone.

3. Valuation fee

The lender requires the property to be valued by a RICS-qualified surveyor (or AVM where permitted). The cost depends on the method:

AVM (automated valuation, 60% LTV or below): £0
Desktop valuation (RICS, no site visit, up to 75% LTV): approximately £250–400
Full RICS physical inspection (up to 75% LTV): approximately £400–800 depending on property size and location

Valuation fees are paid by the borrower and are typically non-refundable — they are paid regardless of whether the loan ultimately completes.

4. Legal fees

The borrower pays two sets of legal costs: their own solicitor (conveyancing and review of the loan offer) and the lender's solicitor (charged to the borrower). On a straightforward residential bridging loan, budget £1,500–3,000 total. Complex cases — commercial property, multi-security structures, third-party charges — cost more. Always ask your solicitor for a cost estimate before instructing.

Exit fee

Some lenders charge an exit fee of 0.5–1% of the loan amount when the loan is repaid. AF Credit does not charge an exit fee. Check the term sheet carefully before accepting any offer — exit fees materially increase the total cost on short-term loans.

Worked examples

Example 1: Fast completion, 60% LTV, 3 months

Cost item	Amount
Loan (60% of £345,000)	£207,000
Interest: 0.79%/month × 3 months	£4,906
Arrangement fee (2%)	£4,140
Valuation (AVM)	£0
Legal fees (est.)	£1,800
Exit fee	£0
Total cost	~£10,846

Example 2: Standard residential, 75% LTV, 6 months

Cost item	Amount
Loan (75% of £290,000)	£217,500
Interest: 0.79%/month × 6 months	£11,615
Arrangement fee (2%)	£4,350
Valuation (full RICS)	~£550
Legal fees (est.)	£2,200
Exit fee	£0
Total cost	~£18,715

The right comparison is not rate vs mortgage rate

Bridging loan monthly rates look high compared to a mortgage annual rate. But bridging loans are short-term instruments. The relevant comparison is total bridging cost vs the value of the opportunity — the profit margin on a refurbishment, the deposit saved on an auction purchase, or the onward property preserved in a chain break. In most cases the bridging cost is a small fraction of what would otherwise be lost.

How to reduce your bridging loan cost

Use AVM valuation — At 60% LTV you pay £0 for the valuation instead of £400–800 for a full RICS inspection.
Keep the term short — Interest accrues daily. If your exit (sale or refinance) is achievable in 3 months, don't take a 9-month term. You can repay early — most lenders charge minimum 1–3 months' interest on short exits.
Choose a lender with no exit fee — On a £200,000 loan, an exit fee of 1% costs £2,000. AF Credit charges no exit fee.
Instruct experienced solicitors — Slow legal work extends the loan term and adds to interest costs. Solicitors experienced in bridging timelines get the job done faster.

AF Credit's cost structure

AF Credit charges from 0.79% per month, with a 2% arrangement fee and no exit fee. Valuation costs depend on the method (AVM is free, RICS costs vary). Legal fees are payable to both solicitors as outlined above. All costs are confirmed in the formal offer — there are no adjustments or hidden charges between indicative terms and draw-down.

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Guide

What Does a Bridging Loan Cost?