Cost of a Bridging Loan: Interest, Fees and Charges

Last updated: 20 July 2026

Bridging loans are often described as short-term finance designed to “bridge” a gap. They are commonly used when timing is critical, such as buying a property before another one sells, funding an auction purchase, or covering a temporary cash shortfall.

One of the most common questions borrowers ask is simple: how much does a bridging loan actually cost? The answer is rarely straightforward. Bridging loan costs are made up of several components, and the total amount you repay can vary significantly depending on how the loan is structured.

This guide explains the interest, fees and charges associated with bridging loans in the UK, so you can understand where the costs come from and how they add up.

What is a bridging loan?

A bridging loan is a short-term loan, usually lasting between a few months and up to 12 months, though some run slightly longer. It is typically secured against property and repaid in full at the end of the term, often using funds from a property sale, refinance or another planned exit.

Because bridging loans are designed for speed and flexibility rather than long-term affordability, they are usually more expensive than standard mortgages or personal loans.

How bridging loan interest works

Monthly interest rates

Unlike most personal loans, bridging loan interest is usually quoted as a monthly rate, not an annual one.

For example:

1. A rate of 0.7% per month
2. A rate of 1% per month

At first glance, these numbers can appear low, but they represent short-term borrowing. When viewed annually, the equivalent cost is much higher than traditional lending.

How interest is charged

There are three common ways bridging loan interest may be handled:

1. Serviced interestYou pay the interest each month during the loan term. This reduces the final repayment but requires ongoing monthly payments.
2. Rolled-up interestInterest is added to the loan balance and repaid in one lump sum at the end. This is common when borrowers do not want monthly outgoings.
3. Retained interestInterest for an agreed period is calculated upfront and held back from the loan amount. Any unused interest may be refunded if the loan is repaid early.

The method used has a direct impact on the total cost of the bridging loan.

Arrangement fees

Most bridging loans come with an arrangement fee, sometimes called a lender fee.

1. This is often around 1% to 2% of the loan amount
2. It may be added to the loan rather than paid upfront
3. It is usually charged once, at the start

For example, on a £200,000 bridging loan, a 2% arrangement fee would be £4,000.

Arrangement fees are one of the largest non-interest costs and should always be factored into affordability calculations.

Valuation fees

Because bridging loans are secured, the lender will usually require a professional property valuation.

1. The cost depends on the property type and value
2. Residential valuations are typically cheaper than complex or commercial properties
3. Fees can range from a few hundred pounds to several thousand

Valuation fees are usually paid upfront and are often non-refundable, even if the loan does not complete.

Legal fees

Both the borrower and the lender will need legal representation.

Common legal costs include:

1. Your own solicitor’s fees
2. The lender’s legal fees (often payable by the borrower)
3. Additional charges for complex transactions or tight deadlines

Legal costs can increase quickly if the property title is complicated or if multiple securities are involved.

Broker fees

If you use a credit broker to arrange a bridging loan, there may be a broker fee.

1. This can be a fixed amount or a percentage of the loan
2. Some brokers are paid commission by the lender instead
3. Fees should always be disclosed clearly before you proceed

Clever Lending acts as a credit broker, helping borrowers understand their options and the potential costs before applying.

Exit fees and early repayment charges

Some bridging loans include an exit fee, often around 1% of the loan amount, payable when the loan is repaid.

Others may have:

1. Minimum interest periods (for example, three months’ interest even if repaid sooner)
2. Early repayment charges within a set timeframe

Not all bridging loans include these charges, but they can materially affect the overall cost.

How the total cost of a bridging loan is calculated

The total cost is influenced by several factors working together:

1. Loan amount
2. Monthly interest rate
3. Loan term
4. How interest is charged
5. Arrangement and exit fees
6. Valuation and legal costs

Example (illustrative only)

A simplified example might look like this:

1. Loan amount: £150,000
2. Interest rate: 0.9% per month
3. Term: 6 months
4. Arrangement fee: 2%

Interest over 6 months could total £8,100.

The arrangement fee would be £3,000.

Before legal and valuation fees, the total cost could exceed £11,000.

This example is for illustration only. Actual costs depend on individual circumstances and lender terms.

Why bridging loans are more expensive than other borrowing

Bridging loans carry higher costs because:

1. They are short-term and often arranged quickly
2. Lenders take on more risk
3. Repayment depends heavily on a future “exit” strategy

For this reason, bridging finance is generally used when timing or flexibility matters more than cost.

You can learn more about how this type of borrowing works on our guide to bridging finance for borrowers, which explains when it may be suitable and when it may not.

Using a bridging loan calculator

A calculator can help you estimate potential costs based on:

1. Loan size
2. Interest rate
3. Term length

Clever Lending provides a bridging finance calculator to give a high-level estimate of how interest might build up over time. These tools are useful for comparison, but they are not quotes and should not replace professional advice.

Key things to consider before taking out a bridging loan

Before proceeding, it is important to think about:

1. Your exit strategy and how realistic it is
2. Whether delays could increase interest costs
3. The impact of fees on the total amount repaid
4. Whether alternative borrowing options may be cheaper

Bridging loans can be effective in the right circumstances, but they are rarely the cheapest form of finance.

Final thoughts

The cost of a bridging loan is made up of more than just the interest rate. Fees, legal costs and how the loan is structured all play a major role in the final amount you repay.

Understanding these charges upfront can help you avoid surprises and make a more informed borrowing decision. If you are considering bridging finance, taking the time to compare options and calculate the full cost is essential.