Are Bridging Loans Expensive?

Bridging finance is quick and convenient as it doesn't require the lengthy checks that regular mortgage lenders need but this convenience does come at a price. When arranging a bridging loan, typically the following costs will be incurred:

1. Most lenders in the UK charge an Arrangement fee of 2%
   
2. If you choose to ask a broker to help you arrange your finance they will likely charge a fee of 0.5-1% (depending on the size of the loan)
   
3. It is standard practice that the borrower is required to pay the Lender's legal fees associated with the transaction (again, the amount charge will vary with the size and complexity of the transaction)
4. It is also standard practice that the borrower is required to pay the Lender's valuation fees (a RICS valuer will typically charge based on the size of the property; if the loan is at a very low LTV then sometimes no valuation will be required)
5. Some lenders also charge an Exit fee to pay the loan off. This can be as much as 2% but the practice is rare and we will always try to avoid placing clients with such lenders unless there is no other option

So as you can see there are many fixed costs to set up the loan they probably total 4-5% of the loan amount. The valuation will need to be paid up front but most others can be added to the loan if required.

After these costs we then look at the interest rate. This will vary depending on:

• The location of the property
  
• The nature of the property (both these points revolve around how saleable is the property in a default scenario)
  
• The LTV of the loan
  
• Whether the loan is a 1st, 2nd, 3rd or 4th charge
  

Many people advertise rates from 0.45% per month or the like but these are reserved for low LTV loans on prime properties. Typically a loan will be at just under 1% per month for a first charge and just over 1% per month for a second charge. All the interest can be rolled up and paid off at the end.

So a Bridging loan is convenient but it does come with costs. Our job here at Choice Loans is to ensure we guide you to the best rate and solution for you.