Bridging finance is a great short-term loan for situations that require speed and flexibility but it’s important to understand bridging finance rates so you can make an informed decision. When looking to apply for bridging finance, it is essential to consider if it is viable.
We know that understanding it all can be confusing so we answered some important questions below about bridging finance rates so you have a better insight into how it works.
Bridging finance rates are mostly set by the lender but are also decided on through various other factors .
How much are bringing finance rates?
Bridging finance rates can be influenced by the Bank of England’s base rates, which means the rates can fluctuate between 0.55% and 1.5% per month depending on the market.
Your exact rates will depend on factors like:
-Type of property being purchased
-Exit strategy
-The lender
-Your loan to value (LTV)
-How quickly finance needs to be arranged
– Whether you are doing development works
The table below resembles a typical £100,000 bridging loan
| Interest Rate | Monthly Interest |
| Rates from 0.55% | £550 |
| Rates from 0.70% | £700 |
| Rates from 0.75% | £750 |
| Rates from 0.85% | £850 |
| Rates from 0.95% | £950 |
| Rates from 1.00% | £1,000 |
| Rates from 1.05% | £1,050 |
| Rates from 1.10% | £1,100 |
| Rates from 1.20% | £1,200 |
| Rates from 1.25% | £1,250 |
| Rates from 1.50% | £1,500 |
How do bridging finance interest rates work?
Bridging finance rates works similarly to traditional borrowing, the lender sets the interest rate and it’s typically paid monthly with the repayment of the loan. The main difference is that bridging finance rates are quoted monthly unlike traditional borrowing like standard mortgages that are quoted annually.
As bridging finance is designed to be a short-term loan repaid quickly the interest rates can be more expensive. An important factor to remember however is that most bridging lenders only charge interest on the months your loan is outstanding, with no early repayment charges. This could make bridging finance a better solution compared to other loans.
How are bridging finance interest rates calculated?
Calculations are typically based on the following factors:
-Total borrowing amount
-Length of loan term
– Your LTV
-How much deposit/security you put down
as well as other factors based on a risk assessment set out by the lenders.
What are the bridging finance fees?
When taking out Bridging Finance there are additional fees you will have to pay.
These fees include:
–Set-up Fees: Generally this is 1-2% of the bridge loan amount and covers the cost of setting up the loan.
–Administration Fee: This is paid at the end of your bridging loan to complete the required paperwork.
–Legal Fees: This is a set rate that covers the lender’s legal fees
–Valuation Fees: the cost of having your property valued
–Broker Fees: This fee is if you hire a broker to compare bridging loans for you.
There may also be other fees so it’s important to make sure you are aware of all fees before deciding to take bridging finance.
How is the interest repaid in Bridging Finance?
Repaying your interest depends on the terms and conditions of your loan.
There are three main ways to repay interest with Bridging Finance:
1. Monthly interest payments: This option works the same as your standard mortgage. The borrower makes monthly payments at a set amount. Each month, you will need to make a repayment on the interest for your loan.
2. Rolled-up interest: Payments of interest are deferred by the borrower to the end of the loan term. The interest is then added to the loan amount at the end of the term and the borrower repays the total amount.
3. Retained interest: This option provides more flexibility as the maximum interest owed is included in your loan value. Any interest that isn’t used is repaid to you at the end of the loan term.
As bridging finance is a short-term loan there are no charges for early repayments.
Are interest rates fixed or variable?
Bridging finance rates are typically fixed and are set by the lenders. This means the interest paid will remain the same throughout the loan period and is not linked to the change in interest rates in the UK.
This allows for more stability and predictability when it comes to knowing what you will be paying monthly or at the end of your term.
Need advice on bridge loan interest rates?
At Bridging Finance our experienced team is ready to guide you through the various options available to you. We are experts in sourcing the best finance products for our clients no matter the circumstances or individual needs.
To discuss the benefits of bridging finance in more detail, contact a member of the team at Bridging Finance.
If you want to know more about bridging finance you can also read more here on What is Bridging Finance? The Complete Guide.
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