Bridging lenders typically highlight the interest rate first, but it reveals little about the true cost. Bridging loans involve several fees, each appearing at different stages of the process.
In this article, you will learn exactly:
- What you can expect to pay for a bridging loan, with a breakdown of each fee
- A comparison of the same deal across three different rates
- A clear explanation of how much money your solicitor will actually receive
Note: This guide covers unregulated bridging loans for investment and buy-to-let property in England and Wales. Because these are unregulated, the FCA conduct rules and Financial Ombudsman protections for residential borrowers do not apply.
What makes up the cost of a bridging loan?
Typically, a bridging loan costs between 7% and 10% of the amount you borrow over a 6-month term. This figure includes all charges, not just interest.
Interest is simply the largest single component.
All examples below use the same scenario: a £300,000 buy-to-let property in England, purchased with a £200,000 bridging loan over six months.
This represents a 67% loan-to-value (LTV) ratio. For context, the market average is 55%, so this example sits slightly above the middle range.
What do bridging loans actually cost in 2026?
Recent industry figures show the market average monthly rate was 0.81% in the second quarter of 2026.
Rates are quoted monthly because the loans are short. A term of 3-12 months does not fit an annual figure neatly, so lenders price the way the loan is actually used.
This often catches first-time borrowers out: a rate of 1% per month is not the same as 1% per year. On a £200,000 loan, 1% per month equals £2,000 each month, totalling £12,000 over six months.
Where your deal falls within the rate range depends largely on how secure it appears to the lender.
A straightforward buy-to-let purchase at 60% to 70% LTV, backed by a mortgage agreed in principle, should fall within the mainstream rate band. If you are quoted 1% or more for a deal like this, it’s worth asking what’s pushing the rate higher.
What fees will you pay?
Fees are where the overall cost adds up, and they are often the part that borrowers forget to include in their budget.
If you go direct, you avoid the broker fee, but you also lose out on someone who can compare rates across the whole market. That is a trade-off, not just a saving.
Default charges are another key consideration. Choosing a term you can realistically exit within is essential, as running past your loan term will cost you much more than paying a slightly higher rate.
Plus, you should also consider smaller fees, such as telegraphic transfer, drawdown, and admin charges. These typically range from £25 to £400 each.
How is the interest actually charged?
Lenders can charge interest in 3 ways, and each affects both your day-one cash and your final bill. Ask which method your lender is quoting.
- Retained: The lender withholds the entire term’s interest upfront, so you make no monthly payments but receive less cash on day one.
- Rolled up: Interest is added to your balance each month and paid at the end. No payments leave your pocket during the term, but interest compounds, so you pay slightly more than a simple calculation would suggest.
- Serviced: You pay the interest monthly, much like a traditional mortgage. Your balance stays flat, making this the lowest total interest option, but you will need cash flow to cover the payments.
The examples in this guide use serviced interest, as it is the simplest to follow. However, retained interest is most common for investment deals, so the net advance figures shown below are likely to be most relevant to you.
What would a £200,000 bridging loan cost?
This section examines how the same deal is priced at three points across the market: a prime rate, a mainstream middle rate, and a rate at the top end of mainstream.
For a fair comparison, fees are held constant: a 2% arrangement fee, a £600 valuation, and £2,000 in legal work for both sides, with no exit fee included.
The difference between the cheapest and most expensive example is £4,200 for an identical deal. This demonstrates the value of comparing rates.
At the mainstream rate, the total cost is approximately £16,800. This figure includes the valuation and both sets of legal fees, not just the interest and arrangement fee.
If you shorten the term to three months, the interest is reduced by half and the total falls to around £11,700. Term length is the most powerful lever available to control costs.
How much money actually reaches your solicitor?
It is usually less than the loan amount, and this is where many completions encounter issues.
Lenders often deduct the arrangement fee and any retained interest from the loan before releasing the funds. For example, on a £200,000 facility at the mainstream rate, deducting £10,200 of interest and a £4,000 arrangement fee means approximately £185,800 will arrive in your solicitor's account.
The shortfall depends on the interest method. Retained interest is deducted upfront, so the gap is largest. Serviced interest leaves more cash available on day one but requires monthly payments instead.
If you require the full £200,000 to complete your purchase, you must cover that shortfall in advance, not just days before completion. Always request the net advance figure in writing from every lender.
Timing is important as well. You usually pay valuation and legal costs during the application, while arrangement fees and retained interest are deducted at completion. Exit and extension fees are payable at the end.
Why do two borrowers get different quotes?
Bridging loans are priced based on the specifics of each deal. Four main factors influence your rate:
- Loan-to-value: Borrowing 60% typically secures a better rate than 75%. Contributing more of your own funds to the deal means less risk for the lender.
- Your exit: This refers to your plan for repaying the loan. Having a mortgage agreed in principle typically results in a better rate than an unclear plan to sell.
- The property: Standard flats and houses are the least expensive to finance. Unusual or partially built properties generally cost more.
- Your experience: A first-time bridging borrower may pay more than an experienced landlord with a portfolio.
One point to watch: Lenders that advertise a single flat rate for all applicants are selling simplicity, not necessarily a discount. Borrowers with a low loan-to-value and a strong exit can often secure a better deal with a quote tailored to their circumstances.
What extra costs apply if you live outside the UK?
Buying from abroad introduces additional costs in three key areas, and nearly all lender guides overlook these.
1. Legal work often takes longer
Identity and source-of-funds checks are more intensive. You may need documents to be certified, translated, or notarised, which typically adds £500 to £1,500 to the solicitor's bill.
2. Currency is another factor
If you earn in one currency and repay in sterling, the exchange rate on your repayment date may differ from the one you budgeted for. A 3% fluctuation on a £210,000 redemption is £6,300.
3. Loan-to-value limits may also be lower
Many lenders cap overseas borrowers below their standard limit, so you may need a larger deposit compared to a UK-resident buyer.
Choosing a lender based overseas does not remove any of these hurdles. Your solicitor, valuation, Land Registry work, and source-of-funds checks will still take place in the United Kingdom, at United Kingdom prices.
How can you pay less for a bridging loan?
Borrow for the shortest realistic term, since interest is the largest cost. Lower your loan-to-value if possible, as a smaller loan against the same property will be less expensive.
Ensure your exit plan is firmly in place before you draw down, and have your documents ready from the outset, because delays will add to your interest costs.
Then obtain two written quotes and compare them based on net advance, not just the monthly rate. A lender offering 0.85% with no exit fee may be less expensive than one at 0.75% with a 1% exit fee.
Request a redemption statement from each lender based on your actual expected exit date. That is the true amount you are likely to pay.
Get a quote before your completion date sets the pace
The expensive mistake is not paying bridging rates. It is budgeting for a £200,000 facility, receiving £185,800, and finding the gap days before completion.
One of our clients, an overseas couple buying a £250,000 property in Birmingham, hits that wall from the other side. Their mortgage stalled in overseas underwriting, putting their deposit at risk.
A 6-month bridging loan cleared approval in 24 hours and completed in 13 days. They kept the deposit and refinanced onto a long-term mortgage.
Our terms are fixed and published upfront: 1% per month, a 2% handling fee, up to 75% LTV, and terms of 3, 6, 9 or 12 months, on residential buy-to-let property in England.
Get your net advance confirmed in writing:
GoGoProp lends under Money Lending Licence No. 1341/2025.
Key takeaways
- The UK market average was 0.81% per month in Q2 2026. Mainstream residential deals sit at roughly 0.65% to 0.95%.
- A bridging loan usually costs about 7% to 10% of the amount borrowed over six months, covering interest and all fees.
- Bridging rates are quoted per month, not per year. At 0.85% per month, a £200,000 loan costs £1,700 in interest every month.
- The same £200,000 deal costs £4,200 more at 1.00% than at 0.65%, so compare quotes before you commit.
- Interest can be retained, rolled up, or serviced. Ask which you are quoted, because it changes your day-one cash and your final bill.
- Lenders often deduct interest and the arrangement fee before release, so a £200,000 facility can put about £185,800 in your solicitor's account.
- Extension fees and default charges are the highest avoidable costs, so pick a term you can realistically exit within.
- Bridging on investment property is unregulated, which means FCA conduct protections and the Financial Ombudsman route do not apply.
FAQs
Is it worth getting a bridging loan?
It is worth it when speed decides the deal. If a delay would cost you the property or your deposit, the bridging cost is usually smaller than the loss.
Can you repay a bridging loan early?
Often yes. Ask two things: whether an early repayment charge applies, and whether unused retained interest is rebated. No penalty does not always mean a refund.
What happens to the fees if the loan does not complete?
Valuation and legal work already carried out is normally still payable. Ask which costs are refundable before you instruct a surveyor or solicitor.
What if you cannot repay at the end of the term?
Most lenders will consider an extension, charging an extension fee plus continued interest. Speak to them early, because default charges cost far more.
Do you need a UK bank account or credit history?
Usually not. Funds move through your UK solicitor's client account, and specialist lenders price on the property and your exit rather than a UK credit file.
How fast can a bridging loan really complete?
Bridging Trends put the 2026 average at 46 days. Individual lenders quote 10 to 14 days, which is achievable on a clean case with documents ready, but not typical.
