In most cases, the lender will not charge an upfront fee. However, you will still have to budget for some upfront costs, such as a valuation fee for a RICS qualified surveyor, which can be a few hundred pounds for a small residential property or new home, up to several thousand pounds when the property being used for security is a high value commercial asset. Assuming the valuation comes back as okay, and the security property is acceptable and within lending criteria, then the legal process will start.
You will be liable for the cost of the lender’s legal fees, as well as your own, which again can vary with the bridging loan work required and whether they need to investigate how you will repay the loan. If not via a straightforward sale, they will need to understand your exit strategy and for which you may have to provide evidence, which can also increase the cost.
In addition to the valuation fees and legal fees, you may also have to pay for any associated professional fees, such as if there are any structural issues, damp, contamination, asbestos, Japanese Knotweed, subsidence etc that may require a specialist assessment. Also, bridging loans that are being used to renovate or develop a property, may require an initial quantity surveyor report, as well as the ongoing monitoring surveyor costs.
In most cases, you will be charged an administration fee and arrangement fee/facility fee by the lender, typically 2% of the gross bridging loan amount. Exit fees are not usually charged, but on difficult cases or unusual assets, the lender may charge an exit fee. Monthly interest rates vary with the strength of the underlying asset, the experience of the borrower, and for closed bridging loans, the strength of the exit strategy – or how you intend to repay the loan. The client’s credit profile is also a factor, with bridging finance at the highest loan to value and cheapest rates only available to those borrowers with clean credit.
The arrangement fees are deducted from the gross loan, leaving the borrower with a net figure. Broker fees are not always charged for straightforward residential bridging finance transactions, but when charged, are typically 1%.
The interest charges vary depending on the asset class being used as collateral, the repayment strategy or “exit route”, the amount of equity being put down by the borrower, the perceived risks and the general creditworthiness and experience of the applicant. In general, the higher the LTV, the higher the bridge loan percentage rate.