Cost Of Bridging Loan

Cost Of Bridging Loan

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Typical Bridging Loan Costs

Typical bridging loan costs do vary for a magnitude of reasons. This article looks at the cost of bridging finance. There are many associated costs of bridging finance
and depending which product you end up going for will determine the costs associated with the loan.

What Is The Cost Of A Bridging Loan

The cost of a bridging loan have a huge range. Below we included all associated cost but not one lender will use them all. The solicitors and surveyors will always vary and the solicitors and surveyors will need to be on panel of the lender you are applying for a loan from.

Bridging Loan Costs

Here are few costs to consider:

Arrangement fees

The majority of bridging lenders charge an arrangement fee of approx 2% of the loan size. Depending on the lender there may be an admin fee, and these vary from one lender to the next. Some lenders charge 1% in and 1% out. The 1% out may be on the rolled up interest not on the original loan size. Thus, slightly higher. The arrangement fee is a fee you pay as the borrower to the lender. 

Broker fees

A broker fee can be included in the arrangement fee but this varies from product to product. We charge on a success-only basis, whereby you pay nothing until the loan completes.  Typically, this fee materialises when the lender does not pay the broker for the introduction or the payment to the broker isn’t sufficient enough to broker the deal.

Deposit

A typical deposit for a bridging loan is around 30-40%, although a few lenders will offer an 80% LTV and this can be net loan on day one. It is possible to borrow a 100% Loan to Value (LTV) of the purchase price.  However, another form of security is typically used as the deposit.

Valuation fees

As bridging loans are secured loans, the bridging lender will require a valuation of the properties that the loans are to be secured against, whether that be just the purchase property or additional assets you are using as security. If you are offering multiple assets, a valuation charge is likely to apply to each one assessed. This can range from £250-£30,000+ per asset, depending on the value. In most cases, a valuation is conducted by a RICS surveyor to assess if the property. Is worth the price being paid and the loan to value (LTV) ratio is adequate for the loan.

Drawdown fees

In order to drawdown funds, a drawdown fee may apply, this may also be referred to as an admin fee. These fees vary from lender to lender and may apply to each drawdown of funds, if the loan is accessed in stages. This usually applies to the refurbishment part of the bridging facility then this is much more likely. This is more than likely to materialise when a refurbishment loan component is in place. For example, you start construction and naturally the project thresholds will have to be met in order to drawdown the next tranche of funding. This will have to be signed off by a quantity surveyor (QS) to draw down after pre agreed parts of the project are completed.

Redemption fees

Some lenders charge a redemption fee to remove the legal charge from the property. This is usually in the region of £100-£150+.

Exit fees

An exit fee can be in the terms and can generate a 1% fee of the total loan value. This is typically charged on redemption of the loan, although this can vary slightly depending on the lender.

Solicitor fees

A solicitor will be required to carry out the legal aspect of your bridging loan arrangement. Fees can vary dramatically based on the size and circumstances surrounding the loan.

Interest charges

This can be rolled up, retained, deferred interest or simple interest. The way this structure will have an impact on the net loan on day one.

Average Cost Of A Bridging Loan

The cost of a bridging loan are as follows. The associated fees above are all fees and not applicable to every loan. Typically, there is a 2% fee and a rates range from  0.39% to 1% per month. We have written deals at 3% – 5.5% per annum.

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