Bridging Loan Rates
When considering a bridging loan which is effectively a short-term loan until a more permanent solution is available, the key aspect to consider is its viability. The most likely indicator of whether bridging finance is viable depends on the rates available at the time. Bridging loan rates can be influenced by the Bank of England base rate and depending on the circumstance can vary between 0.43% and 1.5% per month. A bridging loan typically runs from 0 – 12 months, though certain circumstances can be extended longer.
Typical bridging loan criteria are as follows:
- 0.43% – 1.5% monthly interest rate
- 75% Loan to Value (LTV) – This can increase to over 100% with additional security
- Arrangement fee of 1 – 2%
- No exit fee (on certain products)
- No minimum term i.e. loans can be repaid after a day
The table below resembles a typical £100,000 bridging loan
|Interest Rate||Monthly Interest|
Typical bridging loan repayment cost (rate 0.43%) over 12 months
|Bridging Loan Amount||Repayment Amount (excl. broker fees etc)|
Bridging Loan Arrangements
Our standard LTV-based bridging loan interest rates are:
|LTV Value||Interest Per Month|
|LTV up to 50%||0.49% per month|
|LTV from 50% to 65%||0.64% per month|
|LTV from 65% to 70%||0.84% per month|
|LTV from 70% to 75%||0.94% per month|
We typically use the OMV (Open Market Value) of a property to calculate the bridging loan LTV amount. However, OMV figures do tend to be slightly higher than forced sale or 90-day valuations.
Lenders Facility Fee / Arrangement Fee
Although we often charge lower rates, a standard lenders fee of 2% is usually applied when arranging bridging loan finance. We base this on the gross amount borrowed.
|Amount Borrowed||Arrangement Fee|
|£75,000 to £150,000||2%|
|£150,000 to £750,000||2%|
When calculating the bridging loan arrangement fee using the figures provided, it is important to consider that the minimum loan duration is 30 days. If you repay the loan before this period has elapsed, you will still be charged 30 days full interest on your bridging loan. Once thirty day period has passed, we will only expect you to pay interest up to and including the date that you have completed the full repayment of the bridging loan.
The products outlined in the guide above have no exit fees, no default interest rates, no penalty fees and no early redemption charges. Lenders may also offer certain deals with no arrangement fee whatsoever, depending on the size of the bridging loan and the borrower’s circumstances.
Short Term Borrowing Plan
If you are looking to borrow up to 60% LTV over a 24-month repayment period, why not consider our short-term loan plan?
Our short-term bridging finance options have the following advantages:
- Borrow up to 60% LTV over 2 years
- Fixed arrangement fee of 2%
- Interest paid monthly or at the end of the loan term
It is important to note that our short-term borrowing plan typically takes longer to set up than a standard bridging loan and that the fees are somewhat higher than your usual 12-month loans.
Bridging Loan Costs Explanation
Several factors affect the cost of borrowing when applying for a bridging loan such as the interest rate, which is typically expressed as monthly percentage. Interest rates are primarily influenced by the amount borrowed and are LTV based.
It’s important to remember that bridging loans are intended as a short-term borrowing option due to the interest rates being high in comparison to long-term loans.
Other costs to consider when applying for bridging finance are:
Most bridging finance brokers charge a fee for their services.
Some lenders charge an exit fee which they add to the loan amount when you make the final repayment. With UK Property Finance there are no exit charges to pay.
When applying for bridging finance there is usually a lender’s fee involved – ranging from 0% to 2%, depending on the amount borrowed. This is included in the loan costs.
As well as paying your own solicitor’s costs you will usually be expected to pay the lender’s costs in exchange for them setting up the bridging loan. Legal fees can vary greatly from one lender to the next.
Interest Roll Up
Although most interest charges are paid monthly on a bridging loan many lenders offer the option to ‘roll up’ the interest, which means that the interest is charged in full at the end of the loan term.
If you are unable to provide an adequate surveyors report a property valuation will need to be carried out before the loan application is completed. In most instances you will be expected to pay for this upfront. The money is usually paid directly to the surveyor undertaking the valuation.
Most bridging loan lenders will offer a concessionary rate of interest that is applicable provided you stay within the repayment terms. If you make your payments on time and stay within the agreed repayment period you will usually be given a lower interest rate as an incentive. If you stray outside the agreed repayment period or you miss a payment, you will often be liable to pay a higher rate of interest.
Additional Factors That Influence Bridging Loan Interest Rates
Although the fees and rates charged vary considerably from lender to lender, several factors will influence the amount you will be able to borrow and the interest rates you will be charged when applying for bridging finance.
These are as follows:
- The Loan to Value amount
- The type of property offered as security
- The condition and location of the property
- The type of legal charge you have on the property
- Your monthly income and ability to make the repayments
- Your credit history
- The duration of the loan
- The cost of lending and affordability of the loan from the lender’s viewpoint
Bridging Loan Comparison
Our bridging loan partners help us deliver the best property bridging loans for our customers allowing UK Property Finance to provide the best bridging loan rates in the UK.