Commercial Bridging Loan Rates and Costs
Understanding the true cost of a **commercial bridging loan** requires looking beyond the headline interest rate. Arrangement fees, exit fees, legal costs, valuation charges and the interest structure all contribute to the total cost, and comparing bridging products on rate alone can be misleading.
At **Commercial Mortgages Broker**, we help clients compare the total cost of bridging facilities across the full market to ensure they secure the most competitive deal. This guide breaks down every cost component so you can make informed decisions.
Monthly Interest Rates
Commercial bridging loan interest rates are quoted **monthly**, not annually. This is an industry convention that reflects the short-term nature of bridging finance.
Current Rate Ranges
| LTV Band | Typical Monthly Rate | Equivalent Annual Rate |
|---|---|---|
| Up to 50% LTV | 0.55% - 0.75% | 6.6% - 9.0% |
| 50% - 65% LTV | 0.70% - 0.95% | 8.4% - 11.4% |
| 65% - 75% LTV | 0.85% - 1.25% | 10.2% - 15.0% |
| 75%+ LTV (specialist) | 1.10% - 1.75% | 13.2% - 21.0% |
*Rates as of early 2026. Actual rates depend on the specific case, lender and market conditions.*
Factors Affecting Your Rate
Several factors determine the interest rate you will be offered:
- Loan-to-value ratio: The single biggest rate driver. Lower LTV means lower rates
- Property type: Standard commercial properties (offices, retail, industrial) attract lower rates than specialist properties (pubs, hotels, land)
- Property condition: Well-maintained, tenanted properties achieve better rates than vacant or dilapidated ones
- Exit strategy strength: A confirmed exit (such as an exchanged sale) results in lower rates than an unconfirmed exit
- Loan size: Larger loans may qualify for reduced rates due to economies of scale
- Borrower profile: Experienced property investors with strong financials typically secure better terms
- Speed required: Extremely fast completions may carry a premium
**Key Takeaway:** The advertised "from" rate is achieved only in the best possible scenario (low LTV, prime property, strong borrower, confirmed exit). Most borrowers should expect rates in the middle of the ranges above.
Arrangement Fees
The **arrangement fee** (also called the facility fee) is charged by the lender for setting up the loan. It is the second-largest cost component after interest.
Typical Arrangement Fees
- Standard: 1.5% - 2% of the gross loan amount
- Competitive: 1% (typically for larger loans or lower LTV)
- Premium/urgent: Up to 2.5% for complex or very fast completions
How Arrangement Fees Are Charged
Arrangement fees can be handled in several ways:
- Deducted from advance: The fee is deducted from the loan proceeds at drawdown. You receive less cash but pay no upfront fee. The fee is included in the loan balance if interest is being retained or rolled up
- Paid upfront: You pay the fee separately at completion
- Added to loan: The fee is added to the loan balance, meaning you pay interest on it
Fee Calculation Example
On a £400,000 bridging loan with a 2% arrangement fee:
- Arrangement fee = £400,000 x 2% = £8,000
- Net advance (if deducted) = £400,000 - £8,000 = £392,000
This is important to factor into your cashflow planning. If you need exactly £400,000 to complete a purchase, you will need to borrow more to account for the fee being deducted.
Exit Fees
Some bridging lenders charge an **exit fee** (also called a redemption fee) when the loan is repaid. Not all lenders charge exit fees, so this is an important comparison point.
Typical Exit Fees
- No exit fee: Many lenders now offer exit-fee-free products
- Standard exit fee: 1% - 1.5% of the loan amount
- Capped exit fee: Some lenders cap the exit fee at a fixed amount
Exit Fee Example
On a £400,000 loan with a 1% exit fee:
- Exit fee = £400,000 x 1% = £4,000
This is payable on redemption and is often overlooked when comparing products. A loan with a lower rate but a 1% exit fee may be more expensive overall than a slightly higher-rate product with no exit fee.
**Key Takeaway:** Always compare total costs, not just interest rates. A lender advertising a low monthly rate but charging high arrangement and exit fees may cost more overall than a lender with a slightly higher rate but lower fees.
Legal Costs
Bridging loans require legal work for both the borrower and the lender. In most cases, you are responsible for paying both sets of legal fees.
Borrower's Solicitor
Your solicitor handles:
- Title investigation and searches
- Contract review
- Mortgage deed execution
- Completion mechanics
Typical cost: **£1,500 - £4,000** (depending on complexity and property value)
Lender's Solicitor
The lender appoints their own solicitor to protect their interests. You pay their fees, which typically range from **£1,000 - £3,000**.
Dual Representation
Some bridging lenders accept **dual representation**, where a single solicitor acts for both borrower and lender. This reduces legal costs significantly (saving £1,000 - £2,000) and can speed up the process. Not all lenders or all situations allow dual representation.
Valuation Fees
The lender requires a professional **RICS valuation** of the security property before advancing funds.
Typical Valuation Fees
| Property Value | Approximate Valuation Fee |
|---|---|
| Up to £250,000 | £500 - £1,000 |
| £250,001 - £500,000 | £750 - £1,500 |
| £500,001 - £1,000,000 | £1,000 - £2,500 |
| £1,000,001 - £5,000,000 | £2,000 - £5,000 |
| Over £5,000,000 | £4,000+ |
Valuation fees are payable upfront and are non-refundable, even if the loan does not proceed. Some lenders include the valuation fee within the arrangement fee.
Desktop vs Physical Valuations
For straightforward properties, some lenders may accept a **desktop valuation** (based on available data without a physical inspection), which is cheaper (£200 - £500) and faster. However, most commercial bridging loans require a full physical inspection.
Broker Fees
Using a specialist broker like **Commercial Mortgages Broker** provides significant advantages in the bridging market.
How Broker Fees Work
- Commission from lender: Most brokers receive a procuration fee from the lender (typically 0.5% - 1% of the loan). This does not increase your cost, as the fee is paid by the lender from their arrangement fee
- Additional broker fee: Some brokers charge an additional fee, particularly for complex cases. This should be disclosed upfront
- No broker fee: Some broker firms (including many cases we handle) charge no additional fee to the borrower, relying entirely on lender commission
Total Cost Calculation
To properly compare bridging products, you must calculate the **total cost of the facility** over the expected term.
Example: Total Cost Comparison
**Scenario**: £500,000 bridging loan for 6 months to purchase and refurbish a commercial property before refinancing.
**Lender A: Lower rate, higher fees**
| Cost Component | Amount |
|---|---|
| Monthly interest (0.70% x 6 months) | £21,000 |
| Arrangement fee (2%) | £10,000 |
| Exit fee (1%) | £5,000 |
| Valuation | £1,500 |
| Legal fees (dual rep) | £2,500 |
| Total cost | £40,000 |
**Lender B: Higher rate, lower fees**
| Cost Component | Amount |
|---|---|
| Monthly interest (0.85% x 6 months) | £25,500 |
| Arrangement fee (1.5%) | £7,500 |
| Exit fee (nil) | £0 |
| Valuation | £1,500 |
| Legal fees (dual rep) | £2,500 |
| Total cost | £37,000 |
Despite a higher monthly rate, Lender B is £3,000 cheaper overall due to the lower arrangement fee and no exit fee. This demonstrates why total cost comparison is essential.
Cost as Percentage of Loan
- Lender A: £40,000 / £500,000 = 8.0% total cost over 6 months
- Lender B: £37,000 / £500,000 = 7.4% total cost over 6 months
Early Repayment
Most bridging lenders allow early repayment without penalty, but the rules vary:
Minimum Interest Periods
Some lenders charge a **minimum interest period**, meaning you pay interest for a minimum number of months regardless of when you repay. Common minimums are 1, 3 or 6 months.
Retained Interest Refunds
If interest was retained at drawdown and you repay early, most lenders will refund the unused retained interest. Check this before proceeding, as some lenders do not offer refunds.
No Early Repayment Charges
Unlike commercial mortgages, bridging loans generally do not have fixed-term early repayment charges. The ability to repay at any time without penalty is one of bridging's key advantages.
How to Reduce Bridging Costs
Increase Your Deposit
Higher deposit (lower LTV) directly reduces your interest rate. Dropping from 75% LTV to 65% LTV could save 0.15% - 0.30% per month.
Strengthen Your Exit Strategy
A confirmed, documented exit strategy reduces lender risk and may result in a lower rate. Providing a mortgage offer in principle for the refinance, or evidence of an exchanged sale, strengthens your position.
Use a Broker
Brokers negotiate across the full market and can secure terms that are not available directly. The broker's commission is typically funded by the lender, so the service comes at no additional cost to you.
Choose the Right Lender
Different lenders suit different scenarios. A broker matches your case to the lender offering the best total cost, not just the lowest headline rate.
Minimise the Term
Bridging costs accumulate monthly. The shorter the term, the lower the total cost. Plan your exit strategy to repay as quickly as realistically possible.
Negotiate
Bridging is a competitive market. Lenders have discretion on rates and fees, particularly for larger loans, repeat borrowers and strong cases. Your broker can negotiate on your behalf.
When Is Bridging Worth the Cost?
Despite higher rates than long-term [commercial mortgages](/services/commercial-mortgages), bridging is often the most cost-effective solution when:
- Speed generates profit: Buying below market value at auction or in a quick sale
- The alternative is losing the deal: The cost of bridging is less than the opportunity cost of missing the acquisition
- Value can be added: Refurbishment or repositioning increases the property value beyond the bridging costs
- No other option exists: The property does not currently qualify for a mortgage, and bridging provides time to address the issues
[Contact us](/contact) for a no-obligation bridging quote tailored to your specific situation.
Frequently Asked Questions
Below are the most common questions we receive about commercial bridging loan costs.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*