The usual costs explained here are the ones borrowers should expect when taking out a bridging loan. It covers the main fees and expenses typically associated with arranging, running and repaying a bridging facility. Although each of the costs mentioned should be looked at closely with regards to the amounts being charged, these are the usual standard fees, costs and expenses found with bridging loans.
Also explained here is the importance of set-up costs depending on how long the loan will likely be needed for, or whether the facility is only being arranged as a back-up option. Overall, the section helps borrowers understand the full cost of a bridging loan before committing, compare loan offers more accurately, and to identify any charges that should be questioned or challenged.
The interest rate is often the first thing borrowers look at, but it is only part of the costs involved.
There are a number of additional fees and expenses associated with arranging and running a bridging loan. It is important to understand these fully when assessing the overall cost of a bridging facility.
When comparing different options, it is essential to look at the total cost because these additional fees can add up and may significantly affect the overall cost of the loan.
By understanding the full cost of the loan, this helps to calculate the true profitability of a project, something that is particularly important for borrowers using bridging finance for property projects, such as refurbishments and new developments.
How long a bridging loan is expected to be required for can also influence which factors matter most. For example, if you are only likely to need a bridging loan for a couple of months, the interest rate may be less significant, because the other costs associated with setting up and redeeming the loan, become more important. Alternatively, if the loan is likely to run for a longer period, perhaps 12 to 18 months, then the interest rate will play a much larger role in determining the overall cost.
It is also worth considering the potential costs involved in arranging a bridging loan that you ultimately decide not to proceed with.
Bridging finance is often only set up as a contingency or back-up option, for example in the event a sale doesn’t complete on time. If all does go to plan, then drawing down the funds will not be required.
The upfront costs required to secure a bridging facility can vary between lenders and brokers, so this should also be considered.
Depending on the type of loan, and choice of lender, there is a wide range of potential costs and fees associated with setting up a bridging loan.
The facility fee, sometimes called the arrangement fee, is one of the most common costs charged by bridging lenders.
This fee is typically up to 2% and is calculated based on the net or gross loan amount. Being calculated as a percentage of the net loan amount is the cheaper option for the borrower.
The percentage charged may be reduced from 2%, depending on the size of the loan and circumstances of the deal being offered.
This fee is usually added to the loan and paid when the facility is redeemed, meaning borrowers are not required to pay it upfront. However, since it is added to the loan facility, it is interest bearing, meaning interest is charged on the facility fee for the duration of the loan.
If the facility fee is ‘replaced’ by an exit fee, then it is only charged on redemption of the loan, meaning it is not interest bearing. Provided the exit fee is charged based on the original net loan amount, then this is a slightly better option for the borrower when compared like-for-like to a facility fee.
However, lenders do not tend to use exit fees this way. Whenever you see an exit fee as part of an agreement, it is usually an additional fee being charged, not a replacement for the facility fee.
Some bridging brokers charge a broker fee, an application fee, or both. These charges vary between firms and may depend on the size and complexity of the loan.
Most lenders also pay commission to the broker. In some cases, that commission may be shared between the broker, a packager, a network or a principal firm. Therefore it is always worth asking not just what your broker is charging you, but also how they are being paid by the lender, and who is actually doing the work on your case.
A broker fee can be understandable on smaller or more complex cases. However, on larger loans, where lender commission is already substantial, borrowers should consider carefully whether any additional fee is justified.
Broker fees are usually payable on completion, although some brokers charge on offer. Borrowers should be cautious about fees becoming due before the loan has actually completed. Loan offer to actual completion (draw down) can still require a lot of work, so it is better to agree to pay upon completion to help make sure that your broker remains interested.
Some brokers also charge an application fee to cover the time spent assessing and processing the case. This can be understandable, particularly where bridging is being arranged as a back-up option and may not ultimately be used.
At KIS Finance, we do not charge broker fees or application fees for arranging bridging loans. We have followed this policy since being established in 2008. While we are not against broker fees in principle, we are fortunate to have many returning customers, in particular developers and property investors. This repeat business has helped us maintain our no broker fee and no application fee policy, while continuing to provide the highest level of service to our bridging clients 7 days a week.
Before agreeing to lend, most lenders will require a professional valuation of the property, or properties, being used as security. The cost of this valuation is normally paid by the borrower and will vary depending on the value of the property, type of property, location, the type of valuation required, how quickly it is required, and the surveyor being instructed to carry out the assessment.
In recent years, lenders are increasingly making use of AVMs (Automated Valuation Models) and desktop valuations. These alternatives to a full physical inspection can be significantly faster, with AVMs often providing an immediate result.
In addition to being so much faster and more convenient, some lenders do not charge any valuation fees when an AVM can be used, reducing the set-up costs for the borrower.
For some applications a more specialist report may be required. For example, when improvement or conversion work is going to be carried out. Here a lender will most likely require a valuation report that also includes a breakdown of the expected costs for the intended work, together with their opinion on what the property will be worth once the work has been completed.
The expected end value is known as the Gross Development Value or GDV. These reports will usually cost more than a standard valuation.
Both the borrower and the lender will require legal representation when arranging a bridging loan. Normally the borrower is not only responsible for paying their own legal fees, but the lender’s legal costs also. These are typically passed on as an additional charge and is part of the set-up costs.
A few lenders will wait until completion to collect their side of the legal fees, but usually require some payment upfront for legal costs, or an undertaking, in order to instruct their solicitors.
An increasing number of lenders now offer a ‘dual representation option’. This allows the borrower to use the lender’s solicitor rather than instructing a separate solicitor of their own. Dual representation can be very convenient, as the entire legal process is handled by one firm that specialises in bridging loan transactions, usually having a team dealing with this type of business on a full-time basis.
In most cases dual representation can also be a much more cost-effective option, as the additional charge for dual representation is usually significantly lower than the cost would be for instructing a separate solicitor to act independently for the borrower.
Legal costs can also vary depending on the complexity of the case, the type of security involved and the solicitor appointed. It is always worth confirming the likely costs involved early on during the application process.
Some lenders charge title insurance as one of their set-up fees. This is an indemnity policy that helps protect them should they have to repossess the property that they are using as security. Title insurance ensures an enforceable title, and insures against a number of possible potential problems that a title may have.
Title insurance policies can insure against:
These are potential issues that are explored when solicitors carry out their legal searches. In theory, by insuring against these problems, the legal searches required by the lender can be reduced.
This saves time, as these searches can take 4 to 6 weeks, plus the cost of the title insurance is usually less than the cost of the searches. So faster and cheaper!
Borrowers should, however, be careful when a lender requires full searches and is also charging for title insurance. Expensive title insurance should also be queried.
Some lenders charge administration or processing fees to cover the costs of setting up and managing the loan.
They tend to only be charged if the loan is drawn, are between £100 and £300, and are often deducted from the loan advance.
Although relatively small when compared with other costs, they should still be considered when comparing facilities.
When reviewing a bridging loan offer, it is important to check how long the minimum loan term is. If the loan is repaid before the end of this minimum period, interest will usually still be charged for the entire contractual minimum term.
For the most competitive bridging facilities, the minimum loan term is one month. This means that if the loan is redeemed within the first month, the borrower will still be charged interest for the full month.
Some facilities have longer minimum loan terms, with 3 months being common with some lenders. This should be considered when working out how much the loan will cost if it is likely to be cleared within 3 months, or within any other minimum loan term period.
For regulated loans, after the minimum term period has ended, redemption figures are usually calculated up to the day of settlement.
However, for unregulated loans it is worth checking how redemption figures are calculated once the minimum term has passed. Some lenders calculate interest daily up to the exact date of redemption, while many others may charge interest for the whole month in which the loan is repaid, even if the loan is settled in full right at the start, or during the early part of that month.
When the loan is required by the borrower, the funds are sent to the solicitor via telegraphic transfer. There is a fee for this which the lender usually passes onto the borrower. This fee is approximately £25.
For some bridging facilities, usually those that release more funds as a development progresses, there may be an exit fee of up to 1% of the net or gross loan facility. Due to the more specialist nature of some types of facility, an exit fee is considered reasonable.
However, for fairly straightforward bridging loans, an exit fee is just an additional charge that should be challenged.
For more information about bridging loan fees and costs please see our page on bridging loan interest rates and costs.
The next section details the fees to be vigilant of, as having them as part of a bridging agreement can cost borrowers a lot of money and hassle.
Last updated: 05 May 2026 | © KIS Bridging Loans 2024 | Privacy Notice | Complaints Policy
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