Bridging loans have become an increasingly popular financial solution in the UK property market, especially for those needing fast access to funds for property purchases, renovations, or development projects. These short-term secured loans are designed to “bridge the gap” between an immediate financial need and a longer-term funding solution, offering the liquidity needed to seize opportunities that might otherwise be missed.

In property finance, it’s common to see borrowers focusing mainly on the headline interest rate, often overlooking additional fees that can greatly affect the overall cost of borrowing. This lack of awareness can lead to unexpected financial pressure and, in some cases, jeopardize the success of a property venture. In this guide, we’ll reveal the hidden and often surprising fees associated with bridging loans in the UK, equipping you with the insights needed to budget wisely and negotiate confidently with lenders.

Commonly Known Bridging Loan Costs

Interest Rates

When most people think about the cost of a bridging loan, interest rates naturally come to mind first. Unlike traditional mortgages, bridging loan interest is typically calculated monthly rather than annually, with rates generally ranging from 0.55% to 1.5% per month depending on the lender, your circumstances, and the level of risk involved. 

Interest on bridging loans can be structured in several ways. Some lenders offer “retained interest,” where the interest is deducted from the loan amount upfront, while others may use “rolled up” or “serviced” interest models. With rolled-up interest, the charges accumulate and are paid at the end of the term along with the principal, whereas serviced interest requires monthly payments throughout the loan term. Each method has its advantages, and the right choice depends on your cash flow situation and exit strategy. For regulated bridging loans, we typically see an APR of around 14.6% based on a loan size of £250,000 fixed for 12 months.

Arrangement/Facility Fee

The arrangement fee, sometimes called a facility fee, is the most common upfront charge associated with bridging loans. This fee compensates the lender for setting up the loan and is typically between 1% and 2% of the total loan amount. For larger loans, you might be able to negotiate a lower percentage, but for smaller loans, you may face a minimum fee regardless of the percentage.

Lenders justify this fee by pointing to the administrative work involved in approving and establishing the loan facility, including risk assessment, underwriting, and preparing legal documentation. It’s worth noting that while this fee is standard across the industry, its magnitude can vary significantly between lenders. 

Unexpected or Overlooked UK Bridging Loan Fees 

A. Valuation Fees

One of the first unexpected costs many borrowers encounter is the valuation fee. Before approving a bridging loan, lenders invariably require an independent valuation of the property being used as security. This isn’t merely a formality—it’s a crucial step in the lender’s risk assessment process, providing them with professional confirmation of the property’s market value and condition.

Valuation fees typically range from £500 for straightforward residential properties to several thousand pounds for commercial properties, development sites, or portfolios. What many borrowers don’t anticipate is that these costs can escalate significantly for non-standard properties such as listed buildings, unique architectural designs, or properties in remote rural locations. This is because specialist surveyors may be required, and the complexity of the valuation increases. Additionally, if your property is of mixed-use or commercial in nature, expect to pay considerably more than for a standard residential valuation.

B. Broker Fees

While working with a broker like Rapid Bridging can save you significant time and money by connecting you with the most suitable lenders for your circumstances, broker fees represent another cost that borrowers sometimes fail to factor into their calculations. These fees compensate the intermediary for their market expertise, lender relationships, and the work involved in structuring and placing your loan.

Broker fees can be structured in various ways—some brokers charge a flat fee regardless of loan size, while others work on a percentage basis, typically 1% to 2% of the loan amount. What can catch borrowers by surprise is that not all brokers are transparent about their fees upfront, potentially leading to unexpected costs when you receive your final statement. It’s also worth noting that in some cases, brokers may receive commission from lenders in addition to the fees they charge you directly, creating potential conflicts of interest.

C. Exit Fees

Exit fees represent one of the most frequently overlooked costs associated with bridging finance. Unlike traditional mortgages, where early repayment might be your choice, bridging loans are designed to be short-term by nature—yet some lenders still impose charges when you repay the loan, regardless of the timing.

Typically set at around 1% of the loan amount or equivalent to one month’s interest, exit fees can add a substantial sum to your final repayment figure. What makes these fees particularly troublesome is that they apply even if you repay the loan early, potentially negating some of the interest savings you might have anticipated from early redemption. Some lenders market their products as having “no early repayment charges” while still imposing exit fees under a different name, creating confusion for borrowers.

D. Legal Fees (Both Yours and the Lender’s)

A significant expense that often catches borrowers off guard is the requirement to pay not only your own legal fees but also those of the lender. This dual legal cost structure is standard practice in the bridging loan industry but can be a substantial financial burden, particularly for larger or more complex loans.

Your solicitor will charge for their work in reviewing the loan agreement, conducting searches, verifying title, and handling the completion process. These fees typically range from £1,000 to £3,000 for straightforward residential transactions but can be considerably higher for commercial properties or more complex security arrangements. Simultaneously, the lender will appoint their own solicitor—usually from a panel of firms they regularly work with—whose fees you’ll also be responsible for. Lender’s legal fees often match or exceed your own solicitor’s charges, effectively doubling your legal costs.. 

E. Admin or Fund Management Fees

Beyond the headline costs of interest and arrangement fees, borrowers often encounter various administrative charges that can quickly accumulate. These may appear under different names—admin fees, fund management fees, completion fees, or processing fees—but all contribute to the overall cost of your bridging loan.

These fees typically range from a few hundred pounds to 0.5% of the loan amount and are justified by lenders as covering the administrative overhead of managing your loan throughout its term. This includes activities such as processing payments, responding to enquiries, maintaining records, and monitoring compliance with loan conditions. What makes these charges particularly challenging to account for is that they’re often buried in the small print of loan agreements or terms of business, making them easy to overlook during the application process.

F. Telegraphic Transfer Fees

A seemingly minor but nonetheless relevant cost that borrowers often fail to consider is the telegraphic transfer fee. This charge applies to the electronic transfer of funds between accounts, typically when the lender sends the loan proceeds to your solicitor or when repayments are made.

While individually modest—usually between £25 and £50 per transaction—these fees can accumulate, particularly if your loan involves multiple drawdowns or if you’re financing a development project with staged releases of funds. Some lenders apply telegraphic transfer fees not only to the initial loan advance but also to the final redemption payment, effectively charging you to both receive and repay your loan. In development scenarios, where you might receive monthly or quarterly drawdowns based on construction progress, these fees can add up to hundreds of pounds over the loan term.

G. Early Repayment Charges

While bridging loans are designed to be flexible short-term financing solutions, not all lenders embrace this philosophy when it comes to early repayment. Early repayment charges (ERCs) can represent a significant hidden cost that undermines one of the key advantages of bridging finance: the ability to exit when it suits your circumstances.

Early repayment charges typically take one of several forms. Some lenders impose a minimum interest period—for instance, requiring you to pay interest for at least three months even if you repay the loan after just one month. Others apply a percentage-based exit fee specifically targeted at early repayments, typically ranging from 0.5% to 2% of the loan amount. What’s particularly important to understand is that these charges can apply even if you’re repaying early due to factors beyond your control, such as delays in your exit strategy or unexpected property sale opportunities.

H. Default or Late Payment Fees

One category of charges that borrowers hope never to encounter—but should nonetheless be aware of—is default or late payment fees. These penalties apply when you fail to make payments on time or breach other loan conditions, and they can escalate rapidly, turning a temporary cash flow issue into a serious financial problem.

Default fees vary widely between lenders but typically include an immediate penalty charge (often £100-£250) for each missed payment, plus additional interest charged at a higher “default rate”—sometimes as much as 3-5% above the standard interest rate. This elevated interest applies not just to the missed payment but often to the entire loan balance until the default is rectified. For a £1 million bridging loan, this could mean additional interest costs of £2,500-£4,000 per month on top of your regular interest payments.

I. Extension Fees

Even with the most carefully planned exit strategy, circumstances beyond your control—such as delays in property sales, planning permission complications, or construction overruns—may necessitate extending your bridging loan beyond its original term. When this happens, extension fees represent another significant cost that borrowers often fail to anticipate.

Extension fees typically comprise several components. First, there’s usually an administration charge for processing the extension request, ranging from £250 to £1,000 depending on the lender. More significantly, most lenders require a new facility fee for the extension period, commonly set at 1-2% of the outstanding loan amount. This effectively means paying a second arrangement fee despite continuing with the same loan. Additionally, interest rates for the extension period are frequently increased, sometimes by 0.25% to 0.5% per month above your original rate, reflecting the lender’s increased risk perception.

J. Title Insurance or Indemnity Insurance

A frequently overlooked aspect of bridging loan costs is the potential requirement for title insurance or specific indemnity policies. These insurance products address legal risks associated with the property that might otherwise delay or prevent loan completion, particularly in time-sensitive scenarios.

Title insurance provides protection against unknown title defects, fraud, or errors in public records that could compromise the lender’s security. While relatively common in commercial transactions, it’s increasingly being required for residential bridging loans where speed is essential. Premiums typically range from 0.25% to 0.5% of the loan amount, representing a significant additional cost on larger loans. Beyond general title insurance, specific indemnity policies might be required to address particular risks identified during the legal due diligence process—for instance, absence of planning permission, lack of building regulations approval, or rights of way issues.

Tips for Budgeting Wisely

Get a Full Cost Breakdown from Your Lender Before Signing

Before committing to any bridging loan, insist on receiving a comprehensive breakdown of all potential costs in writing from your lender or broker. This should include not just the headline interest rate and arrangement fee, but every charge discussed in this article—from valuation and legal fees to potential exit and extension costs. Having this information presented clearly allows you to make accurate comparisons between different lending options and budget appropriately for the entire borrowing process.

Ask About All Possible Fees — Even Those That “May Not Apply”

When discussing bridging finance options with lenders or brokers, make a point of asking specifically about each category of fee mentioned in this article, even if you’re told they “probably won’t apply in your case.” Circumstances can change rapidly in property transactions, and fees that seem irrelevant at the outset may become applicable later. For instance, while you might not anticipate needing a loan extension, understanding the associated costs provides valuable perspective if delays occur in your exit strategy.

This approach is particularly important when comparing offers from different lenders, as fee structures vary widely across the industry. Some lenders front-load their charges with higher arrangement fees but offer more flexible terms regarding extensions or early repayment, while others advertise lower upfront costs but impose stricter conditions and higher penalties for any deviation from the original agreement. 

Hire a Solicitor Familiar with Bridging Finance

The legal aspects of bridging finance are specialised and time-sensitive, making the choice of solicitor particularly important. Instructing a lawyer with specific experience in bridging transactions can save you both time and money. Specialist solicitors understand the unique requirements of bridging lenders, anticipate potential issues before they become problems, and know how to progress matters efficiently within tight timeframes.

An experienced solicitor can also provide valuable guidance on fee structures, helping you interpret complex loan agreements and identify potentially problematic clauses relating to costs. They can advise on whether certain fees are negotiable or disproportionate compared to industry standards, and may be able to suggest alternative approaches that reduce your overall legal expenses. 

Build a Buffer (e.g., 10% of loan amount) for Unexpected Costs

Even with careful planning and thorough due diligence, bridging finance transactions sometimes encounter unexpected complications that generate additional costs. Whether it’s the discovery of title issues requiring indemnity insurance, the need for specialist reports following a valuation, or delays in your exit strategy necessitating an extension, having financial contingency is essential.

As a general rule, we recommend building a buffer of approximately 10% of the loan amount into your budget to cover unexpected fees and charges. For a £500,000 bridging loan, this means having access to an additional £50,000 beyond your calculated costs. This buffer provides peace of mind and financial flexibility, allowing you to navigate complications without compromising your wider project objectives or being forced into unfavourable decisions due to cost pressures. 

Compare Multiple Lenders and Brokers

Perhaps the most effective strategy for managing bridging loan costs is to thoroughly compare offerings from multiple lenders and brokers before making a decision. Different lenders have different fee structures, risk appetites, and specialisms, meaning the most cost-effective solution for your specific circumstances may not be immediately apparent from headline rates alone.

When making comparisons, look beyond the monthly interest rate to calculate the total cost of borrowing over your anticipated loan term, including all fees and charges discussed in this article. Pay particular attention to how costs are structured in relation to your exit strategy—if you’re likely to repay early, prioritise lenders with minimal or no early repayment charges; if your timeline is tight, consider those offering more reasonable extension terms. 

Conclusion

By understanding these potential expenses in advance—from valuation and legal fees at the outset to potential extension and exit charges at the conclusion—you position yourself to make informed decisions, negotiate effectively with lenders, and budget accurately for your property transaction. This knowledge doesn’t just save you money; it provides confidence and clarity throughout what can be a complex and fast-moving process.

At Rapid Bridging, we’re committed to transparency, fair pricing, and finding the right solution for each client’s unique circumstances. With over a decade of experience, direct FCA authorisation, and more than 1,000 successful bridging loans arranged, we have the expertise and lender relationships to secure competitive terms while minimising unexpected costs. Contact Rapid Bridging today for a no-obligation consultation and comprehensive cost breakdown, ensuring you have the complete financial picture before proceeding with your bridging loan.