If you aim to purchase property, either for private use or as a commercial project, you’ll almost certainly require finance. Bridging loans are one of the most used forms of finance for such purchases, offering property buyers a fast and flexible method of raising capital. Though incredibly useful, this convenience comes at a premium. Bridging finance is considerably expensive when compared to many alternatives, making it essential to know what you’re getting into before taking out a bridging loan.

In this article, we will be discussing the cost of bridging finance, namely the interest rates that accompany a bridging loan, ensuring you have the information you need to make a suitable decision. Let’s get started.

What is a bridging loan?

A bridging loan is a form of finance that acts as a stopgap measure between making a purchase and long-term finance. Bridging loans prize speed as their main selling point, aiming to get funds into a borrower’s bank account within days of a successful application. This is especially beneficial to property developers, as windows of opportunity can be remarkably brief indeed. Bridging loans can be acquired from some traditional financial institutions, such as banks, but are primarily obtained through private lenders.

Bridging finance falls under the category of secured finance. This means that a borrower must be prepared to use physical assets as collateral for the loan. While this increases the risk assumed by a borrower, as default will mean the seizure of said collateral assets, it does make bridging finance more flexible. Bridging loan lenders are less concerned with a borrower’s credit history, provided the collateral asset is of enough value. This both speeds up the bridging loan process, while also creating the potential for enormous loan amounts. If you have the assets, your bridging loan could easily reach well within the millions.

Another factor that increases the flexibility of bridging loans is its versatility. Bridging loans can be used to finance pretty much any project or purchase, again if you have the assets to use as collateral. Bridging finance can be used to purchase almost any kind of property, from industrial warehouses to private dwellings. Additionally, a wide range of projects can be funded. Including light refurbishment, major renovation, or the construction of an entirely new building.

Bridging loan interest rates

Naturally, the interest rates for a specific bridging loan depend heavily on the type of bridging loan. What it might be used for, the lender, and what the borrower can provide. Bridging loans are typically lent in accordance with the value of a property or good, which is known as Loan to Value (LTV). If you intend to use a bridging loan to fund the purchase of a private dwelling, you can expect to pay these rates:

  • 50% or lower LTV – A starting interest rate of 0.43% per month.
  • 51% to 65% LTV – A starting interest rate of 0.59% per month.
  • 66% to 70% LTV – A starting interest rate of 0.69% per month.
  • 71% to 75% LTV – A starting interest rate of 0.75% per month.

Understandably, the more funding a borrower can provide, the less they will have to pay in interest. As such, you should always aim to provide as much of a deposit as possible, in an effort to reduce your overall expenditure. This is especially true for commercial property purchases, as lenders view them as riskier. If you intend to use a bridging loan to fund the purchase of a commercial property, you can expect to pay these rates:

  • 55% to 65% LTV – A starting interest rate of 0.65% per month.
  • 66% to 70% LTV – A starting interest rate of 0.75% per month.
  • In excess of 70% LTV – A starting interest rate of 0.85% per month.

Other factors that contribute to bridging loan costs

In addition to interest rates, there are a variety of other factors that contribute to the overall cost of a bridging loan. The exact total and what is charged varies from lender to lender. You will find that most lenders require roughly the same amount of fees. As such, you should ensure your budget has enough room to accommodate these costs. These costs are:

  • Property survey – Most bridging loan lenders will require some form of property survey before approving an application. This survey can be somewhat expensive. Though it heavily depends on your particular lender and the size of the property in question.
  • Credit history checks – While your credit history is not as important for bridging loans as other forms of finance, it is still checked. Your lender will likely package this check into their fees, so be sure to budget for it.
  • Environmental checks – For some properties, an environmental check will be necessary. You might want to check with the seller of your chosen property to see if it needs a check, and with your lender to see if they provide this service. This can be as cheap or as expensive as a property survey, depending on how large the property is.
  • Origination/processing fee – Most, if not all, bridging loan lenders will charge an origination fee. Put simply, this is the fee for processing an application. Usually making up around 1% of the overall cost of the loan. Some bridging loan lenders allow this fee to be negotiated, though haggling it down usually results in borrowers paying a higher amount in interest over the duration of the loan. It is advisable to check this fee with your lender, to avoid a nasty surprise at the end of your application.

While not an exhaustive list, these are some of the most common fees charged by bridging loan lenders. As always, you should make sure to check before you close a deal. Otherwise your already pricey bridging loan might be that much more expensive.


Bridging loans can be an excellent way to raise finance, both for property development projects and private house purchases. However, they aren’t terribly cheap. This form of finance couples a fast service with a high price tag. Though for property developers, it is often worth paying. Delays usually mean missed opportunities, so paying a premium for peace of mind tends to be a good idea. That said, you should ensure you do your due diligence and shop around. There’s no point in paying more than you need to, even for a top-draw service.