Bridging Loan Fees and Charges
Fees and charges for Bridging Loans include any additional costs associated with the bridging loan other than the interest of the loan, such as application fees, valuation fees, legal fees, and early repayment penalties.
A bridging loan is a type of short-term loan used to bridge the gap between a financial transaction, such as the purchase of a property and the availability of financing. These loans are often used by investors and homeowners to purchase property quickly without relying on other sources of funds. It's important to understand the fees and charges associated with bridging loans before applying.
What are the Fees & Charges for a Bridging Loan
Interest Rate
The interest rate of a bridging loan typically ranges from 0.45% to 2% per month, depending on the amount borrowed and the lender. Interest is usually charged on a monthly basis, with the amount determined by the loan-to-value ratio. Interest is paid for the full loan term, from the date of loan completion to the date of repayment.
Lender's Arrangement Fee
A Lender's Arrangement Fee, also known as an origination fee, is usually a one-time fee charged by the lender. It is usually a percentage of the loan amount, and the exact amount can vary by lender. Some lenders also charge a commitment fee, which if charged is typically refunded at the point of loan completion.
Broker Fees
A bridging loan broker charges a fee for sourcing and arranging a bridging loan. The fee is usually a percentage of the loan amount and is paid to the broker when the loan is approved.
Valuation Fee
A valuation fee is charged by a professional valuer to accurately assess the value of the property being used as security for the bridging loan and to provide a valuation report. The valuation may either be a valuation report provided by a surveyor or an automated valuation This fee is usually a set amount determined by the lender or surveyor.
Early Repayment Fees
Some lenders may charge a fee if you choose to repay the loan early, as it incurs a loss for the lender. This fee is calculated based on the amount that you choose to pay off and can be charged as a percentage or a set amount.
Exit Fees
An exit fee is a fee charged by the lender when a loan is paid off. It is often calculated as a percentage of the loan amount and the exact amount can vary among lenders.
Late Payment Fees
Late payment fees are charged by lenders if you fail to make a payment by the due date. These fees can be charged as a percentage or as a set amount, and should always be considered before applying for a loan. If late payment fees exist in your bridging loan, they will be outlined in the loan conditions.
Final thoughts
In summary, it's important to understand all the fees and charges that are associated with a bridging loan before applying. Bridging loans can be a useful tool for quickly acquiring funds, but they come with a range of associated costs that should always be taken into consideration. By taking into account these fees and charges, you will be better equipped to make an informed decision about whether a bridging loan is right for you.
