Bridging loans: hidden payments and charges?
No. Not with Affirmative. We are always upfront about the costs to you.
Indeed, one of the major factors behind bridging loans that people want to know are the costs associated with taking out the loan. Whether it is a personal or professional project, before you move ahead these costs are always going to be a consideration.
As such, in this post we look over the different costs associated with bridging loans and show you what to expect.
What are the costs, fees, and charges?
Rates typically start from 1% per month. In such cases, if you were borrowing £250,000 at a rate of 1%, you would pay £2,500 in interest a month.
Interest can be affected by your loan-to-value (LTV) which is the amount you are borrowing as a proportion of the property's value. LTVs can vary depending on if the loan is a "first charge" or "second charge". In a typical case you could expect the following:
- First Charge: From 1% per month (typical APR 28.9%)
- Second Charge: From 1.5% per month (typical APR 32.0%)
To help meet monthly interest payments we can retain from the loan an amount representing a number of monthly interest payments.
You can choose the number of months. The retained interest is still part of the capital sum of the loan, and interest is based on this total amount. This may leave you with slightly less in your hand, but can allow you to focus on the project without the concern of finding the money to pay the monthly instalment.
For example: A £100,000 loan with interest at 1% would be £12,000 interest over a 12 month period. Retaining that from the loan would give you £88,000.
Any other costs involved?
We deduct an arrangement fee from your loan at completion (this is usually 1%) – we will discuss this with you at the outset.
For all loans our solicitors charge a fixed legal fee, inclusive of VAT and expenses. This fixed fee can be added to your loan.
For all loans there is a valuation fee. All valuation fees are paid directly to the valuer or panel manager. We do not charge any administration fee or receive any payment from these parties.
Some loans may have to pay an exit fee, normally equivalent to one month's interest. This is always made clear to you as part of your loan agreement.