How to read a bridging quote

A bridging quote leads with a gross facility — say 70% of a £500,000 valuation, so £350,000. That is not what arrives in your solicitor's account.

From it comes the arrangement fee, usually 1% to 2%, and the retained interest for the whole term if interest is retained rather than serviced. On a twelve-month facility at 0.85% a month, retained interest on £350,000 is £35,700. Add a 2% arrangement fee of £7,000 and the net advance is £307,300 — around 61% of value, not 70%.

Always ask for the net advance figure in writing. It is the only number that tells you whether the deal works.

Many facilities carry a minimum interest period — commonly three months, sometimes six. If you intend to redeem in eight weeks, a three-month minimum means you pay three months regardless.

On £350,000 at 0.85%, that is £2,975 a month. A facility with a six-month minimum redeemed at four months costs you £5,950 you did not need to spend, which comfortably outweighs a 0.1% rate difference.

The question to ask is a simple one: if I redeem in month two, exactly what do I pay?

Charged on redemption, usually as a percentage of the loan or sometimes of the gross facility. Between zero and 2% is the normal range, and it never appears in the headline rate.

Two per cent of £350,000 is £7,000 — the equivalent of two and a half months of interest. A facility at 0.95% with no exit fee will very often beat one at 0.79% with a 2% exit fee over a short hold.

The valuation, your solicitor and the lender's solicitor are all payable by you and none of them appear in the rate. On a £500,000 property, budget £700 to £1,500 for the valuation and £2,000 to £4,000 across both legal bills, more where the title is complicated.

Ask for an estimate of the lender's legal costs before instruction. It varies substantially between firms and it is not fixed by the lender.

This is the only comparison that means anything. Take your realistic redemption date — not your optimistic one — and add up: interest to that date subject to any minimum, arrangement fee, exit fee, valuation, both legal bills and the broker fee.

Do it for each quote on one sheet of paper. The winner is frequently not the one with the lowest monthly rate, and the gap is often thousands rather than hundreds.

Ask what the rate becomes if the facility runs past its term, and whether it applies from the overrun date or retrospectively from day one. Retrospective default interest is not universal, and where it exists it is punishing.

Ask what an extension costs and whether it is available at the lender's discretion or as of right. On any bridge where the exit depends on a sale, this is the term most likely to matter to you.