Bridging Loan Fees Explained
The interest rate is only part of the picture. This guide sets out the fees you may encounter on a bridging loan, how they are charged and how to weigh them up when comparing offers.
Why Fees Matter as Much as the Rate
Because bridging is short-term borrowing, the fees attached to a loan can represent a meaningful slice of the overall cost of credit — sometimes more than the interest itself on a very short facility. Two loans quoted at the same monthly rate can work out very differently once every fee is added in.
Understanding what each charge is for, when it is payable and whether it is taken from your loan or paid separately puts you in a far stronger position. It is also central to reading a quote correctly, which we cover in our guide to gross loan versus net loan.
The Fees You May Encounter
Arrangement (Facility) Fee
The lender's fee for setting up the loan, usually expressed as a percentage of the gross loan — commonly around 2%. It is often added to the loan and deducted from the net advance rather than paid up front.
Application / Administration Fee
A smaller fixed fee some lenders charge to process the application and instruct due diligence. It may be payable early in the process and is not always refundable if the loan does not complete.
Drawdown / Telegraphic Transfer (TT) Fee
A fixed charge to cover the cost of sending funds to your solicitor on completion — typically a modest amount per transfer. It is easy to overlook but should still be recorded.
Valuation Fee
The cost of the independent valuation of the security property, which scales with property value and complexity. It is usually paid by the borrower and often required up front before the loan can progress.
Lender's Legal Costs
Many bridging lenders require the borrower to meet the lender's legal fees in addition to their own. These vary with the size and complexity of the transaction and are typically settled on completion.
Exit Fee
A charge payable when the loan is repaid, sometimes expressed as a percentage of the gross loan or of the value at redemption. Not every lender charges one, so it is worth confirming either way.
Redemption Administration Fee
A fixed fee to close the account and release the lender's charge over the property. It is separate from any exit fee and from your own solicitor's redemption work.
Extension Fee
If you need more time beyond the original term, a lender may agree an extension for a fee, often alongside a revised interest position. Terms for extensions are usually agreed case by case.
Early Repayment Charges (ERCs)
Some facilities include a minimum interest period or a charge for repaying early. This can offset the saving you expected from redeeming ahead of term, so check the position before assuming an early exit is cheaper.
Default Interest
A higher rate that may apply if the loan is not repaid by the end of the term or if you breach the terms. It can be materially higher than the standard rate, which is why a realistic exit is so important.
How VAT Is Treated
Some fees are quoted before VAT and some after, and treatment differs by fee type. Professional services such as valuation and legal work are commonly subject to VAT, whereas interest itself is not. A quote that appears cheaper may simply have shown a fee excluding VAT.
Always confirm whether each figure is inclusive or exclusive of VAT so you are comparing like with like. VAT rules can change, so treat published guidance from GOV.UK on VAT as the reference point and check the current position on any given transaction.
Deducted From the Loan or Paid Separately?
Fees fall into two broad camps. Some are added to the gross loan and deducted from your net advance — the arrangement fee is the classic example. Others are paid separately, often up front, such as the valuation fee.
This matters because deducted fees reduce the cash you actually receive on day one, while separately paid fees are an out-of-pocket cost you fund yourself. Knowing which is which prevents an unpleasant surprise on the completion statement.
Worked Deduction Example
Suppose a lender agrees a gross loan of £300,000 over a 12-month term. The illustrative fee schedule is:
- —Arrangement fee at 2% of gross: £6,000 (deducted from loan)
- —Retained interest for 12 months at 0.85% per month: £30,600 (deducted from loan)
- —Telegraphic transfer fee: £35 (deducted from loan)
- —Valuation fee: £750 (paid separately, up front)
- —Lender's legal costs: £1,200 (paid on completion from your funds)
Deductions from the gross loan total £36,635 (£6,000 + £30,600 + £35), leaving a net day-one advance of £263,365. On top of that you fund the £750 valuation and £1,200 legal costs separately, so your true outlay and net cash position are not captured by the headline £300,000 or the monthly rate alone.
You can model figures like these for your own scenario using our bridging loan calculator, then sense-check the output against a full fee schedule.
"Not Published" and "Quoted Individually" Fees
Some fees are shown as "not published", "on application" or "quoted individually" — most often exit fees, extension fees and lender legal costs. When comparing offers, never assume an unpublished fee is zero. Doing so flatters a quote and can lead you to pick the wrong loan.
Instead, ask for the figure in writing before you compare. If it genuinely cannot be confirmed yet, note it as an open item and treat the offer as incomplete rather than as free. This discipline is a core part of how we approach comparing bridging loan offers.
Reviewed by the 3 Trees Finance team. We keep our guides current with how fees are typically structured across the specialist lending market.
Information on this website is provided for general information only and does not constitute financial or legal advice.
Fee Checklist
- —Arrangement fee (% of gross)
- —Valuation and legal costs
- —TT / drawdown charges
- —Exit and redemption fees
- —Extension terms and ERCs
- —Default interest position
Understand the Full Cost Before You Commit
Send us a quote or an outline of your requirement and we can help you read the fee schedule, flag any open items and model the net position. We work with specialist property finance professionals across the UK and explain how we select the specialists we work with.
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