What a bridging loan actually costs, and what drives the price

Most borrowers come to a bridging loan with a single question: what will this actually cost? The figure on a term sheet rarely tells the full story. The monthly rate is real, but it sits alongside arrangement fees, legal costs, and a valuation. Each of those is billed before you draw a penny.

The confusion is understandable. Bridging finance is quoted differently from a bank mortgage: monthly rather than annual, with a cost structure that bundles several line items into the headline figure. Understanding what goes where matters, because the difference between a 55% LTV and a 70% LTV loan on the same asset can shift your rate materially.

This piece sets out exactly what you are paying for, what drives each component, and when the total is worth bearing.

How the pricing is structured

Bridging finance has three distinct cost layers: the interest rate charged on the outstanding balance, the lender’s own fees, and third-party costs the lender requires but does not control. Conflating them is where surprises at drawdown tend to originate.

The interest rate

Rates are quoted monthly. The figure depends on LTV, asset type, and exit strategy, and it runs higher than a bank mortgage on an annualised basis. That comparison is often the wrong one: a bank mortgage requires income testing, takes weeks to process, and will not lend against certain asset types or borrower profiles. For a deal where conventional finance is unavailable or too slow, the bridging rate is a defined, finite cost against a specific outcome.

Interest structures vary. Serviced interest means you pay monthly as the interest falls due. Rolled-up interest accrues throughout the term and is settled at redemption alongside the principal, useful when cash flow during the loan period is constrained. Some lenders retain projected interest from the advance on day one; others charge on actual days drawn. Confirm the mechanics before signing.

The arrangement fee

Most lenders charge 1–2% of the loan amount as an arrangement or facility fee, deducted at drawdown. Exit fees are less common but exist at some lenders, typically 0.5–1% of the amount repaid at redemption. Check the term sheet explicitly for both.

Third-party costs

Two costs fall outside the lender’s control but are invariably the borrower’s bill. A valuation is required before any commitment: the lender needs an independent assessment of the security. The lender’s solicitors also bill the borrower directly for the legal work on the transaction. Both are standard and expected; budget for them alongside the headline rate.

What moves your rate

LTV is the primary lever

The proportion of the property value you borrow is the largest single determinant of price. A borrower at 50% LTV on a prime residential asset will pay materially less than one asking for 70%. The logic is direct: a larger loan relative to value leaves a thinner buffer for the lender if the asset needs to be realised quickly.

Rikvin lends up to 70% LTV on Singapore security, whether GCB bridging finance, a condominium, or a commercial asset, and up to 75% LTV on UK residential property. Both are indicative and subject to valuation and due diligence.

Asset quality and liquidity

A freehold residential property in a central location is liquid. A secondary-market retail unit or a partially completed development is not. Lenders price the gap: the faster and more predictably they can recover capital through a sale, the tighter the rate. Location, title clarity, and property condition all feed into this assessment.

Exit strategy

Lenders price on the exit as much as on the asset. A signed sale agreement, a refinancing offer in principle from a named institution, or a development completing on a fixed programme attracts a better rate than an open-ended plan. A credible, time-bound exit also affects how comfortable a lender is at higher LTVs. Present it clearly.

Loan size and term

Larger facilities can attract finer pricing because the fixed costs of underwriting are spread more thinly. Term length is less predictable: a 3-month loan may price at par with a 6-month facility because the short runway leaves no margin for delay. Most borrowers find that 6–12 months gives the best balance of rate and contingency.

When the cost is worth it, and when it is not

Bridging finance is expensive only relative to an alternative that actually exists. A borrower in Singapore whose conventional mortgage is blocked by Total Debt Servicing Ratio requirements has no cheaper institutional route for that transaction. A buyer completing at a UK property auction faces a settlement window, typically 28 days, that most bank approval processes cannot match; in the UK, stamp duty land tax must also be filed and paid within 14 days of completion, adding a hard regulatory deadline to the timeline. In both cases, the cost of a bridge is a knowable number against a specific outcome.

It makes less sense when there is no clear exit, when LTV is pushed without a compensating factor, or when the facility is being used to fund ongoing costs rather than bridge a defined gap. The primary risk is entering a bridge without a reliable exit strategy: a deal that extends beyond its agreed term incurs additional cost and, at the extreme, can lead to a forced sale. Rikvin’s funded deal portfolio reflects transactions with clean exits and realistic timelines. Part of our job is identifying early when bridging is the right tool, and saying clearly when it is not.

For a practical illustration, the Holland Road prime residential case study shows how a typical deal is structured from term sheet to drawdown.

Bridging finance is most effective when the borrower enters the conversation knowing the full cost picture: rate, fees, third-party charges, and the exit that drives repayment. That clarity is what makes it a precise tool rather than an expensive habit.