Fees will vary from lender to lender but commonly incurred costs include broker fees a valuation fee legal costs and arrangement fees, also known as facility fees. There is also the exit fee to consider. If the loan amount required isn’t that much and the project is less risky, the lender is likely to offer better rates and fees. But if the project needs lots of money fast fees can be higher. All fees aside from exit fees are usually deducted before the loan amount is paid.

There will also be solicitor’s fees both the lender’s and the borrower’s. The lender’s solicitor will double-check all the information sent over by the borrower’s solicitor and approve the loan once they are satisfied.

Interest can be paid back in a variety of ways. It can be paid at the beginning along with the fees or it can be paid in one lump sum at the end often popular with borrowers without a regular cash flow. To retained interest which is a mix between the two. These are monthly repayments negotiable depending on the terms of the loan.

As well as factoring in the speed at which it takes the lender’s solicitor to double-check everything it will depend on other factors such the time it takes for the valuation to come back whether a primary lender needs to approve a second charge loan and how long that takes and depending on the lender how much information they need on the borrower themselves. Although it varies and it should take no longer than a month: bridging loans are designed to be speedy.

Unlike a mortgage, your income and rental income don’t factor into it. The bridging loan is calculated on the property value alone but different lenders work out values in different ways.

Try out our Bridging Loan Calculator

Whereas the value of a mortgage will be whichever is lower its current value or its buying price some bridging lenders will use the market value rather than the amount to sell.

And some lenders will also calculate loans based on what it will sell for known as the Gross Development Value (GDV). In this case, they will provide an initial loan based on the purchase price (i.e. before refurbishment) and offer a second stage of the loan once the property had been refurbished and its value has increased.

Investors who want to borrow more money for big restoration projects will need to consider how lenders calculate valuations. Lenders can take legal action as a result of any money lost as a result of an inaccurate valuation. So they will have the property independently valued by an RICS surveyor.

Lenders will also want to ascertain a few things before agreeing to a loan. They might ask questions about the experience as a property investor how the loan will be paid back what other assets are owned and any income that the investor gets.

Taking out a bridging loan can be a fruitful investment if everything is considered before and the pros and cons are weighed up. It goes without saying that the borrower needs to be honest. If when and how the loan will be repaid to prevent penalties. Having a clear exit strategy with contingency plans will prevent grief later down the line.

By calculating fees and interest with different bridging lenders borrowers can have a rough idea of costs which should help to weigh up whether the investment will be worth it or not.

The right solicitor can ensure the transaction runs smoothly. Some solicitors specialise in bridging loans to finance buy to lets and are accustomed to the legalities surrounding them as well.

A bridging loan expert will be able to tell within a few days whether they think a loan will be accepted and will offer advice on how to proceed but with all big financial decisions it’s best not to keep your head in the sand and be armed with the knowledge to make the right decision in the first place.

Why not try out our Bridging Loan Calculator to see how much you could borrow.