Bridging Loan Costs Explained: Gross Facility, Rolled-Up Interest, and the Real Cash to Complete

Here's the moment that catches nearly every first-time bridger: the lender agrees a "£108,750 facility" at 75% LTV, and the completion statement shows £96,787 arriving. The missing £12,000 wasn't stolen — it was in the paperwork all along. But if your deal analysis assumed the headline number, you now have a five-figure hole to fill on completion day, from cash you may not have.

Bridging finance is a legitimate and often essential tool for auction purchases, unmortgageable properties, and flips. It just needs to be modelled the way lenders actually structure it. Here's the anatomy.

Gross facility vs net advance — the number that matters

The gross facility is the total the lender commits, capped by loan-to-value (typically 70–75% of purchase price or value). It's the headline of every quote.

The net advance is what lands in your solicitor's account. From the gross facility, the lender deducts:

• Arrangement fee — typically 1.5–2% of the gross facility, almost always deducted up front rather than paid separately
• Rolled-up or retained interest — if you're not making monthly payments (most flippers don't), the lender holds back the full term's expected interest from day one
• Lender's legal and valuation fees — you pay both sides' lawyers
• Admin/exit arrangements depending on the lender

Worked example

A 12-month bridge at 75% LTV on a £145,000 purchase:

Your cash to complete = purchase price + acquisition costs − net advance. On this deal that's roughly £48,000 of your own money — against the £36,000 you'd have estimated using the gross facility. That £12k gap is the most common nasty surprise in bridging, and it's entirely predictable.

Rolled-up vs serviced vs retained interest

• Serviced: you pay interest monthly, like a mortgage. Keeps the facility gross ≈ net, but requires provable income to cover payments, and drains cash through the project.
• Rolled-up: interest accrues (compounding monthly with most lenders) and is settled at redemption. No monthly outgoings, but the debt grows every month the project runs.
• Retained: the lender deducts the whole term's interest up front from the advance. If you redeem early, better lenders rebate the unused months — ask before you sign, because not all do.

For flips, rolled-up or retained is standard. The key discipline: model interest for the realistic project length, then stress it. If your schedule says 6 months, price 9. Refurb overruns and slow sales are normal, and every extra month at 0.75–1% is £800–£1,100 per £108k of facility.

Redemption: what it takes to get out

At the end you repay the facility plus any rolled interest, and possibly an exit fee (avoid lenders who charge one where possible — many don't). Your exit is either:

• Sale — redemption comes out of sale proceeds; your profit is what's left after redemption, selling costs, and everything you put in; or
• Refinance onto a term mortgage — the new lender's valuation and LTV determine whether the refinance clears the bridge. If you bridged at 75% of purchase but the term lender offers 75% of a valuation that didn't rise as planned, the shortfall is yours.

The stress test that matters: does the deal survive redemption if the project runs 3 months over and the end value comes in 5% light? If yes, the bridge is a tool. If no, it's a countdown.

The five numbers to know before you sign

1. Gross facility (and the LTV it implies)
2. Net advance — the actual day-one cash
3. Cash to complete — your money in, on completion day
4. Total finance cost over a stressed term (fees + interest + exit)
5. Redemption figure at your realistic exit date

If a quote doesn't let you derive all five, ask the broker to restate it until it does.

Model the bridge inside the deal, not beside it

Bridging maths only matters in context — it changes your cash to complete, your total project cost, and therefore your maximum purchase price. PropCalc models the bridge end-to-end (gross facility, fees, rolled-up interest, net advance, redemption) inside your flip or HMO analysis, so short-term finance can't hide a hole in the deal. Start a free 7-day trial and see the real cash-to-complete on your next project before you commit.

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FAQ

What does bridging finance cost in total? As a rule of thumb: 0.7–1.1% per month interest plus a 1.5–2% arrangement fee plus valuation/legal costs — so a 9-month bridge often totals 9–12% of the facility. Always compute the total in pounds over your stressed timeline, not the monthly rate.

Why is my net advance so much lower than my facility? Because arrangement fees, legal/valuation costs, and (if rolled up or retained) the full term's interest are deducted from the gross facility before funds are released. That's normal — but it must be in your model.

Can I repay a bridge early? Usually, and most lenders have no ERC after a minimum period (often 1–3 months). With retained interest, confirm whether unused interest is rebated at redemption — it varies by lender.

Calculations in this article are illustrative estimates only and do not constitute financial, legal, or investment advice. Bridging finance is typically unregulated when secured on investment property; take advice from a qualified broker.