Are you looking for the latest bridging loan rates?
As with any finance, the interest rates for bridging loans vary quite widely depending on some of the following factors:
- Amount of Loan
- Level of Collateral / Security
- Duration of Loan
Since bridging finance is one of the more expensive forms of short-term loan available, it’s worth understanding the likely interest rates, as well as any additional fees you may be liable for.
We’ll explore both in this article, and if you’d like a no-obligation quote, or some free advice do get in touch with our specialist team.
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Bridging Loans Interest Rates are Higher than a Traditional Mortgage
Because of their nature as a short term loan, bridging loans are a very different form of finance than a mortgage and come with higher interest rates.
In fact, as a short term loan their rates are usually given as a monthly fee, rather than a traditional APR (annual percentage rate).
Current Bridging Loan Interest Rates (as of August 2019)
|Bridging Loan Lender||Bridging Loan Amount||Bridging Loan interest
rate (representative APR)
|United Trust Bank||75,000-25,000,000||0.55 to 0.98%||1 month to 3 years|
|Shawbrook Bank||50,000-15,000,000||0.55 to 0.98%||1 month to 2 years|
|LendInvest||75,000-25,000,000||0.59 to 0.99%||1 month to 2 years|
|Octopus Real Estate||100,000-25,000,000||0.60-1.15%||1 month to 2 years|
|Greenfield Capital||25,000-5,000,000||0.65 to 0.95%||1 month to 1 year|
|Oblix Capital||50,000-5,000,000||0.65 to 1.40%||1 month to 1 year|
|Funding 365||100,000-5,000,000||0.65 to 1.70%||3 months to 1 year|
What's the Difference Between Fixed or Variable Rates?
Before you secure your bridging loan you'll need to work out whether it's on a fixed or variable rate.
A fixed rate means the same interest applies across the full term of the loan, no matter what changed occur in the external market. If you can secure a good rate at a fixed time, this obviously brings greater security with it, in terms of being aware of your repayments at all times.
A variable rate means that the interest rates are liable to change, which means you need plan for a higher rate of repayment as a possibility.
How do Bridging Loan Lenders Calculate Their Interest?
There are different industry practices regarding calculating and applying the rate of interest, so you'll have to check the individual providers to be sure.
Generally speaking, there are two methods:
Rolled Up Interest
Rolled up Interest means the interest is simply calculated up front and added to the balance of the overall loan.
This is a popular practice in bridging, since borrowers want an easy figure to manage without having to factor in monthly payments.
This also means that interest isn't charged to the interest, which can happen with the retained interest alternative.
Most bridging loans are calculated these days using the retained interest model.
Essentially, the borrower also borrows the interest payments due on the loan, when the finance is taken out. This money is then 'retained' by the borrower who uses this to cover the monthly payments.
Bridging Loans are a short term, high interest loan commonly used with a clear exit strategy in mind, such as the sale of a property. They are fast to arrange secured loans that can be used either by individuals or businesses. Since the credit crunch of 2008, few high street banks continue to offer bridging: rather, this area is now served by the alternative lending market.Learn more about bridging loan interest rates
Bridging loans can be arranged in as little as 48 hours although a period of about 2 weeks is more common. Generally lasting between 1 month and 2 years, the industry average for bridging finance is around 6 or 7 months duration. Learn more about bridging loan interest rates
Your ability to qualify for bridging finance depends primarily on the amount of security you can offer in relation to how much you're trying to borrow. This key metric is known as LTV, meaning 'loan to value' and while it can go as high as 75%, it is far commonly around 50%. In addition to loan security, your credit score will be investigated, amongst other factors as part of the lenders due diligence.Learn more about bridging loan interest rates