n 2025, the appeal of bridging finance continues to grow across the property market — from landlords upgrading buy-to-lets to developers refinancing assets mid-project. But while bridging remains the fastest route to liquidity, the cost can be misunderstood. Too often, borrowers fixate on the quoted monthly rate — 0.6%, 0.8%, or 1% — and overlook the deeper layers of fees, compounding interest, and exit mechanics that define the real cost of capital.

At scale, this misunderstanding can quietly erode project margins or transform what seemed like an efficient bridge into an expensive burden.

This guide unpacks every element of bridging costs — from entry to exit — and shows how careful structuring, lender selection, and forward planning can preserve your returns.

For a primer on when and why bridging makes sense, see What Is Bridging Finance and When Should You Use It? and Unlocking Capital with Bridging Loans. This article builds on those fundamentals to focus squarely on economics: how much a bridge really costs once every line item is accounted for.

The Anatomy of Bridging Costs

When you take out a bridging loan, you’re not simply paying interest on a balance. You’re paying for speed, flexibility, and risk tolerance — the things mainstream lenders rarely offer. But those advantages come with their own economics.

Every bridge is built around five core cost categories:

1. Arrangement fees – the lender’s upfront charge for setting up the facility, typically 1–2% of the loan amount.
2. Legal fees – both the borrower’s and lender’s solicitors’ costs, which can range from £2,000 on a simple deal to £10,000+ for complex or multi-title transactions.
3. Valuation fees – professional assessments of property value, often required for both purchase and exit planning.
4. Interest – the ongoing cost of borrowing, applied monthly or daily depending on the product.
5. Exit costs – fees triggered at repayment, such as exit charges, redemption penalties, or retained interest reconciliation.

Understanding how these interact is essential to calculating the true “all-in” cost.

Arrangement Fees: The Cost of Access

Arrangement fees are typically charged as a percentage of the gross or net loan amount.

If you borrow £500,000 at 70% LTV, a 2% arrangement fee adds £10,000 — often deducted from the advance rather than paid upfront.

These fees are not arbitrary. They compensate the lender for risk, capital allocation, and speed of service. Lenders operating in niche sectors — such as refurbishment or development finance — may charge higher fees to offset specialist underwriting and short deployment cycles.

Some borrowers attempt to negotiate lower arrangement fees, but that can sometimes backfire. In many cases, a slightly higher fee tied to a lower interest rate produces a cheaper total cost. A broker experienced in short-term lending can model these trade-offs precisely.

Interest: The Hidden Variable That Changes Everything

The most significant cost driver in any bridge is how interest is applied. There are three main methods, each with dramatically different implications:

1. Retained Interest

The total interest for the loan term is calculated upfront and deducted from the advance.

Example: On a £500,000 loan at 1% per month for 12 months, £60,000 of interest is “retained” immediately — you receive £440,000 net.

The advantage? You have no monthly payments. The drawback? You’re paying interest on money you never actually receive. If you repay early, you rarely get a refund.

2. Rolled Interest

Interest accrues monthly and is added to the balance, compounding over time.

This model offers flexibility, but you pay interest on the interest — meaning the real annualised rate is higher than the nominal one.

It’s common in mid-term refurbishment projects or cases where liquidity must remain inside the build.

3. Serviced Interest

You pay interest monthly from your own funds, just like a traditional mortgage.

This option reduces total cost significantly over time but requires ongoing cash flow. Serviced structures can improve perceived borrower strength in underwriting, sometimes leading to sharper pricing.

Each structure serves a purpose. A lender offering choice among them is usually a good sign — it indicates sophistication and underwriting flexibility rather than a one-size-fits-all approach.

Valuation and Legal Fees: The Friction of Due Diligence

Speed and accuracy are twin pillars of bridging. To achieve both, lenders require rapid valuation and legal confirmation. But those processes cost money — often more than borrowers expect.

Valuations typically cost £500–£2,000 for standard properties and £3,000+ for high-value or multi-unit assets. Some lenders offer “desktop” valuations for low-risk transactions; others insist on full RICS surveys regardless of loan size.

Legal fees are another variable. Bridging solicitors must work to extremely tight deadlines, often managing title irregularities, company searches, or cross-charge agreements. Expect dual representation — your lawyer and the lender’s — to protect both sides. The faster you want to complete, the more you’ll typically pay for legal resource.

Exit Fees and Early Repayment Nuances

The end of a bridge can be just as costly as the beginning.

Some lenders charge exit fees, usually 1% of the loan amount, payable upon redemption. Others forgo exit fees but build that margin into the interest rate.

Early repayment terms also vary. In Early Repayment Charges (ERCs) in 2025: Timing Your Switch and Saving Thousands, we explored how penalty structures affect remortgages — and the same principle applies here. If your project may finish ahead of schedule, ensure your facility allows early repayment without full-term interest.

Worked Example: A Realistic Cost Comparison

Consider two 12-month bridging options for a £500,000 loan:

Option A: Retained Interest Model

• Rate: 0.9% per month
• Arrangement Fee: 2% (£10,000)
• Exit Fee: None
• Net Advance: £446,000 (after retained interest and fees)

Total cost if repaid in 6 months: ~£54,000 (no rebate).

Effective annualised rate: approx. 14.4%.

Option B: Serviced Interest Model

• Rate: 0.8% per month
• Arrangement Fee: 1.5% (£7,500)
• Exit Fee: 1% (£5,000)

If repaid in 6 months, total cost: £15,000 interest + £12,500 fees = £27,500.

Effective annualised rate: ~6.6%.

On paper, both look similar. In practice, the difference exceeds £25,000 — proof that structure often matters more than rate.

Why “Headline Rates” Mislead Borrowers

Many lenders advertise low headline rates, but those rates only apply to ideal scenarios — perfect LTVs, clean titles, and strong exit plans. Once underwriting begins, the actual cost often rises through risk-based pricing, retained interest, or extended minimum terms.

An experienced intermediary, such as Willow Private Finance, helps decode these subtleties. We model not only the lender’s quoted rate but also the effective yield after compounding and fees, enabling you to compare “apples with apples” across different lenders.

In How Fast Can Bridging Finance Be Arranged?, we showed that speed can justify higher pricing — but only when you know the true cost per day of capital. A transparent cost analysis prevents expensive surprises at exit.

Reducing the True Cost: Strategic Considerations

To manage total cost effectively, experienced borrowers now focus less on rate and more on structure.

Several strategies stand out:

• Define the exit before entry. The best bridging terms are negotiated around a clear exit strategy — whether that’s sale, refinance, or conversion to a buy-to-let.

• Negotiate retained term flexibility. Some lenders will allow partial rebates for early repayment; others won’t. Clarity here saves money later.

• Bundle fees smartly. In some cases, legal and valuation costs can be rolled into the loan. For liquidity-tight projects, this preserves working capital.

• Use experienced brokers. Brokers with access to both mainstream and private bridging lenders — such as those featured in Private Bank Mortgages Explained: Benefits and Drawbacks — can compare structures that generalist advisers may overlook.

Frequently Asked Questions

1. What are typical bridging loan fees?
Most bridging loans include arrangement fees (1–2%), valuation fees, legal costs, and sometimes exit fees. The total effective cost depends on loan term and structure.

2. How do retained and rolled interest differ?
Retained interest is deducted upfront; rolled interest compounds monthly. Retained suits fixed terms, rolled suits flexible or phased projects.

3. Can I repay a bridging loan early?
Yes, but some lenders charge full-term interest regardless of when you repay. Always confirm early repayment terms in writing.

4. What’s the cheapest way to structure bridging finance?
Serviced interest loans tend to be cheapest overall, but require monthly payments. The best structure depends on your project cash flow and exit timing.



5. Are all bridging lenders regulated?
No. Some are unregulated, particularly for corporate borrowers. Working with an authorised broker like Willow ensures your deal is compliant and transparent.

How Willow Private Finance Can Help

At Willow Private Finance, we specialise in structuring short-term property finance that works — not just on paper, but in practice.

We model every cost component — arrangement, legal, valuation, retained interest, and exit — so you know the true financial impact before committing.

Whether you’re refinancing an acquisition, funding refurbishment, or bridging to sale, our independent, whole-of-market access ensures you get transparent, efficient funding that aligns with your project goals.

📞 Want a Transparent View of Bridging Costs?

Book a free strategy call with one of our bridging specialists.

We’ll help you structure your loan, model total costs, and secure the best outcome for your next transaction.