Interest rates on bridging loans
Bridging loans have higher interest ratesbecause you are paying for the privilege of borrowing a large sum of money rapidly. Bridging loans are charged daily rather than annually because they are often short-term. You can expect to pay anything from 6%APR up to 20%APR depending on the loan. This is far higher than the mortgage interest rates offered by today's finest mortgage packages.
A bridging loan's interest is calculated in three ways, unlike a regular mortgage:
- Monthly: Similar to an interest-only mortgage, where the interest payments are made each month and not added to the loan balance.
- Rolled up: Interest payments are rolled up into the loan and paid when the bridging loan is paid off.
- Retained: You borrow the interest upfront for a set length of time, and then any unused interest is returned to you when the loan is repaid.
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