How Much Does a £10 million bridging loan cost?
A £10 million bridging loan at an illustrative interest rate of 0.75% per month would incur £75,000 in monthly interest, or £900,000 over 12 months, before lender fees and other charges.
At the same rate, a £15 million bridging loan would incur £112,500 in monthly interest, while a £20 million loan would incur £150,000.
High-value bridging finance is generally arranged around the individual transaction. The cost depends on the amount borrowed, property security, loan-to-value, repayment strategy and lender requirements.
Below, we compare the costs of £10 million, £15 million and £20 million bridging loans, including interest, arrangement fees, repayment structures and the considerations involved in larger transactions.
How Much Does a £10 Million to £20 Million Bridging Loan Cost?
Bridging finance interest rates are usually quoted monthly rather than annually.
The table below shows illustrative interest costs for borrowing between £10 million and £20 million at a rate of 0.75% per month.
| Loan Amount | Monthly Interest | 6 Months’ Interest | 12 Months’ Interest |
|---|---|---|---|
| £10 million | £75,000 | £450,000 | £900,000 |
| £15 million | £112,500 | £675,000 | £1,350,000 |
| £20 million | £150,000 | £900,000 | £1,800,000 |
Figures assume simple, non-compounding interest at a constant 0.75% per month on the stated loan amount. This is an illustrative rate, not a current lender quotation. Arrangement fees and other charges are excluded.
Even a small difference in interest rate can substantially affect the cost of a large bridging loan.
For example, a 0.1 percentage point difference in the monthly interest rate on £10 million would equal £10,000 per month, or £120,000 over 12 months, assuming simple interest.
The actual rate will depend on the lender’s assessment, and the quoted rate is only one consideration when comparing financing options.
What Fees Apply to High-Value Bridging Loans?
In addition to interest, borrowers need to consider arrangement, valuation, legal and potentially other charges.
Lender Arrangement Fees
The lender may charge a fixed arrangement fee or a percentage of the loan amount.
For example, an illustrative 1.5% arrangement fee would amount to:
| Loan Amount | Arrangement Fee at 1.5% |
|---|---|
| £10 million | £150,000 |
| £15 million | £225,000 |
| £20 million | £300,000 |
These calculations are illustrations, not standard lender fees or quotations.
An arrangement fee may be payable separately or financed as part of the loan, depending on the lender’s terms.
Valuation and Legal Fees
Lenders generally require valuations of the properties used as security.
For high-value transactions, this can involve multiple properties, commercial premises, development sites or properties with complex ownership structures.
Valuation costs depend on the security and the work required. There may also be legal fees for both the borrower and lender, particularly where multiple securities or corporate arrangements are involved.
These costs should be established from quotations rather than assumed to be a fixed percentage of the borrowing.
Broker and Other Fees
Additional charges may include broker fees, lender administration fees, security-related expenses and, where applicable, exit or extension fees.
Not all lenders charge the same fees, and the lowest interest rate will not necessarily produce the lowest total cost.
At Kerr & Watson, we explain and agree any applicable broker fee before proceeding with chargeable work.
Example: Total Cost of a £10 Million to £20 Million Bridging Loan
To illustrate the combined effect of interest and lender arrangement fees, consider the following examples.
All three assume:
- A 12-month borrowing period.
- An illustrative monthly interest rate of 0.75%.
- Simple interest without compounding.
- A lender arrangement fee of 1.5% of the stated loan amount.
- No additional interest charged on financed fees or interest.
| Cost | £10 Million | £15 Million | £20 Million |
|---|---|---|---|
| 12 months’ interest | £900,000 | £1,350,000 | £1,800,000 |
| Arrangement fee | £150,000 | £225,000 | £300,000 |
| Total interest and arrangement fee | £1,050,000 | £1,575,000 | £2,100,000 |
These figures exclude valuation, legal, broker, exit and other applicable charges. They are simplified examples, not actual lending quotations.
For a £10 million loan, the interest and arrangement fee would total £1,050,000 over 12 months under these assumptions.
However, this does not necessarily mean the lender would provide £10 million in cash and require exactly £11,050,000 at redemption.
The amount released and the amount repayable will depend on the agreed loan structure.
Gross Loan vs Net Advance: Why It Matters
When arranging high-value bridging finance, it is important to distinguish between the gross loan, the net advance and the redemption amount.
Gross loan
The total borrowing or facility under the lender’s agreed structure. This may include interest or fees being financed, depending on how the loan is arranged.
Net advance
The amount actually released to you after any applicable deductions, such as retained interest or fees.
Redemption amount
The amount required to repay the borrowing, including the outstanding capital, accrued interest and any applicable charges.
For example, if £10 million of capital is advanced in full, interest accrues at 0.75% per month without compounding over 12 months, and the arrangement fee is paid separately at the outset, the capital and interest due at redemption would be £10.9 million.
The £150,000 illustrative arrangement fee would already have been paid separately, taking the combined borrowing cost to £1.05 million before other fees.
If the interest or arrangement fee is instead financed within the facility, the gross borrowing and net amount released may differ.
For a transaction of this size, it is important to establish exactly how much capital will be available at completion and what will be required to redeem the loan.
Find out Your Options
What Affects the Cost of a High-Value Bridging Loan?
Lenders assess several factors when considering bridging finance of £10 million or more.
Loan-to-Value and Property Security
Loan-to-value (LTV) measures the borrowing relative to the value of the property used as security.
For example, a £10 million loan against a property valued at £20 million represents 50% LTV before allowing for any additional financed interest or fees.
Lower LTV borrowing may provide access to more competitive terms, although lenders will also consider the property, its marketability and the proposed exit.
Some transactions may involve security over multiple properties. The lender will assess the combined security and any existing charges.
Property Type and Complexity
The security could involve residential investment property, commercial premises, mixed-use buildings, land or development sites.
Property condition, tenancy arrangements, planning matters and ownership structures can affect the lender’s decision and pricing.
More complex security may also require additional due diligence, valuations and legal work.
Borrower Experience and Financial Position
For investment or development transactions, lenders may consider the customer’s experience, financial position and previous projects.
Corporate structures, existing borrowing and guarantees can also influence the available terms.
Exit Strategy
The proposed method of repaying the loan is central to a bridging application.
Lenders will generally want clear evidence that the intended sale, refinancing or other repayment arrangement is realistic.
An uncertain exit strategy can restrict lender availability, regardless of the value of the property offered as security.
How Is Interest Charged on High-Value Bridging Finance?
The way interest is handled can have a substantial impact on cash flow and the amount available to the borrower.
Serviced interest: Interest is paid during the borrowing period, usually monthly, with the outstanding capital repaid at the end.
Rolled-up interest: Interest accrues during the term and is settled when the loan is redeemed. The method of calculation varies, and interest may compound.
Retained interest: An agreed provision for interest is included within the facility or deducted from the amount advanced, depending on the lender’s structure.
These arrangements should be compared using the amount actually available to the borrower and the total expected redemption cost.
Our bridging loan cost guide explains the different interest arrangements in more detail.
What Can a £10 Million or Larger Bridging Loan Be Used For?
High-value bridging finance may be considered for substantial property transactions where short-term funding is required.
Examples include:
- Purchasing commercial or residential investment property.
- Acquiring a portfolio of properties.
- Completing a property purchase before another asset has been sold.
- Refinancing existing short-term property debt.
- Acquiring a property or development site before longer-term finance can be arranged.
- Raising capital against eligible property security for an appropriate investment or business purpose.
The amount available and suitability of bridging finance depend on the individual transaction and lender criteria.
For construction projects involving significant works and staged funding, development finance may be more appropriate.
Why Is the Exit Strategy Particularly Important for Larger Loans?
A bridging loan is designed to provide temporary funding, so the lender needs confidence that the borrowing can be repaid within the agreed term.
For example, a £15 million facility might be intended to be repaid following the disposal of an investment property portfolio.
The lender may consider the value of the assets, existing borrowing, expected sale proceeds and whether the proposed sale period is realistic.
Alternatively, a customer may intend to refinance the bridging loan onto longer-term commercial or investment finance.
In that situation, the potential availability of the replacement borrowing should be considered before entering into the bridge.
If the planned exit is delayed, interest will generally continue to accrue. Extension fees, additional borrowing costs or other charges may also arise, and the lender is not obliged to extend the facility.
On a £20 million bridging loan, an additional three months at an illustrative 0.75% per month would amount to £450,000 in extra simple interest, before any other charges.
This makes planning for potential delays particularly important.
Frequently Asked Questions About High-Value Bridging Loan Costs
How much does a £10 million bridging loan cost?
At an illustrative interest rate of 0.75% per month, a £10 million bridging loan would incur £75,000 in monthly interest or £900,000 over 12 months, assuming simple interest without compounding. Arrangement fees and other charges would be additional.
How much does a £15 million bridging loan cost?
A £15 million bridging loan at an illustrative 0.75% monthly rate would incur £112,500 in monthly interest. Over 12 months, this would total £1.35 million in simple interest, before lender and other fees.
How much does a £20 million bridging loan cost?
At an illustrative 0.75% interest rate per month, a £20 million bridging loan would incur £150,000 in monthly interest, or £1.8 million over 12 months, assuming simple interest without compounding and excluding fees.
Can you get a bridging loan for more than £10 million?
Potentially, yes. Certain specialist lenders and funding providers may consider larger bridging facilities, subject to the proposed security, loan amount, transaction structure and exit strategy. Availability is not guaranteed.
Can high-value bridging loans be secured against multiple properties?
Some lenders may consider security over several properties, depending on their valuations, existing charges, locations and legal ownership. Multiple properties can make the transaction and legal work more complex.
Can you repay a £10 million bridging loan early?
Potentially. Early repayment terms vary between lenders. Some charge interest for the period the loan remains outstanding, while others apply minimum interest periods or specific redemption charges. These conditions should be reviewed before proceeding.
Are high-value bridging loans FCA regulated?
Some bridging loans are regulated by the Financial Conduct Authority, while others are not. The position depends on factors including the borrower, security, intended use and applicable exemptions. The size of the borrowing alone does not determine whether it is regulated.
Speak to Kerr & Watson About High-Value Bridging Finance
Whether you require £10 million, £15 million, £20 million or a larger facility, Kerr & Watson can help you explore available bridging lenders and understand the proposed costs and borrowing structure.
We review the property security, borrowing requirements, intended timescale and exit strategy before discussing suitable funding options.
With large bridging transactions, establishing the net funds available and total repayment obligations is particularly important.
Speak to Kerr & Watson to discuss your high-value bridging finance requirements.
