Interest is usually rolled up which means you do not pay for it monthly, it is taken out of the loan based on the loan term. Once you pay the loan back a calculation is made based on the number of days the loan had been outstanding, this is called a daily rate, this is the interest you will be charged. It works like this a £100,000 Bridging Loan with a 6% interest rate would be equal to £6,000 if the total loan was outstanding for 12 months, £6,000 divided by 365 days gives a daily interest rate of £16.44 therefore if your loan was outstanding for 100 days and then repaid, the total interest chargeable to you would be 100 days x £16.44 meaning total interest payable of £1,644.00.

In addition to interest you will have to factor in an arrangement fee which is typically 1-2 percent of the agreed loan amount, as mentioned previously, the arrangement fee is not based on the loan term, it matters not if the loan is for 3,6 or 12 months the arrangement fee you pay will be exactly the same  so there is no benefit in taking out the loan for a lesser period of time, as seen above you will only ever be paying interest on the total outstanding loan.

You will also have to factor in legal fee costs for the lender’s solicitors and also for your own, these are usually based on the loan amount and can be agreed before any solicitors have been instructed to do any work.

The other cost you will need to factor in is for a surveyors valuation. Valuation costs are normally from £100-£150 per £100,000 of the properties valuation. So if the property is valued at £250,000 the valuation fees would come in at around £250-£375. As with legal fees you should get a quote from the Surveyors before any instructions are made for them to act for you.

Bridging loan terms can be anything from 1-18 months, although most lenders start off with a 12-month term and then look to extend it if required. Our Bridging Loan Calculators can work out your repayment terms of any period of time, you can use it to work out what your total costs are likely to be over any given number of months and also at different interest rates.