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Understanding the true cost of HMO bridging finance is essential before committing to any deal. The headline monthly rate is only one part of the picture — arrangement fees, exit fees, legal costs, valuation fees and the choice of interest structure all affect what you actually pay.
This guide breaks down every cost component, shows how different interest structures compare on a real example, and explains what drives rates up or down.
For broker-arranged HMO bridging finance, see The HMO Mortgage Broker.
Current HMO Bridging Finance Rates (2026)
HMO bridging loan rates are quoted as a monthly percentage rather than an annual rate. As of early 2026, rates across the specialist bridging market range from approximately:
- 0.55% per month — best available for low-LTV, straightforward security, experienced borrowers
- 0.75-0.85% per month — typical mid-market rate for standard HMO bridge deals
- 0.95-1.2% per month — higher-risk deals, second charge, credit issues, complex security
To put these in context: 0.75% per month is equivalent to approximately 9.4% per annum on a simple interest basis. Rolled-up interest compounds differently — see the worked examples below.
Rates change frequently in the bridging market, responding to base rate movements, lender appetite and market competition. Rates cited here reflect current conditions but should be confirmed with a broker at the point of application.
For more on this topic, see our guide to The Insider’s Guide to HMO Remortgage Rates.
What Affects Your Rate?
Loan-to-Value (LTV)
LTV is the dominant pricing factor. Most lenders price in bands:
- Up to 60% LTV: Best available rates
- 60-70% LTV: Standard pricing
- 70-75% LTV: Higher rates, fewer lender options
LTV is calculated on either the current value (for straightforward refurb or purchase deals) or the gross development value (GDV) for conversion projects.
For more on this topic, see our guide to Navigating the Challenges of HMO Development Finance.
Property Type and Condition
Properties in good condition with clear HMO potential attract better rates. Properties that are derelict, have structural issues, require planning permission, or are subject to complex title attract higher rates — the lender's risk is greater.
Standard C3-to-C4 HMO conversions are well understood by most specialist bridging lenders. Larger conversions to Sui Generis read more, commercial-to-residential, or industrial conversions typically attract higher rates and require more experienced lenders.
Borrower Experience
First-time HMO investors are accepted by many bridging lenders, but experienced landlords with a track record of successful HMO projects attract more competitive pricing. Lenders want confidence that you can execute the exit — particularly a refinance exit.
Credit History
Bridging lenders are considerably more flexible on credit than standard mortgage lenders. Missed payments, defaults, satisfied CCJs and previous bankruptcy are all considered by specialist lenders on a case-by-case basis. However, live adverse credit — particularly undischarged bankruptcy or active IVAs — will limit options significantly.
First vs Second Charge
Second charge bridging rates are higher than first charge, typically by 0.2-0.4% per month, because the lender's security position is weaker.
Loan Size
Larger loans (£500k+) can attract preferential rates as lenders compete more actively for higher-value business. Smaller loans (sub-£150k) may be subject to minimum fee floors that effectively increase the overall cost.
How Interest Is Charged
There are three main structures for bridging loan interest. Each has different cash flow implications.
Monthly Serviced Interest
You pay the interest each month as it accrues, like a standard mortgage. The loan balance does not grow.
- Best for: Borrowers with strong monthly cash flow who want to minimise total interest cost
- Downside: Requires monthly outgoings throughout the bridge term
Rolled-Up Interest
Interest accrues monthly and is added to the loan balance. You pay nothing during the term; everything is repaid on exit.
- Best for: Borrowers refurbishing a property with no rental income during the works period
- Downside: The loan balance grows each month, and interest compounds on an increasing principal
Retained Interest
The lender calculates the total interest for the full agreed term and deducts it from the loan on day one. If you exit early, some lenders refund the unused months; others do not.
- Best for: Predictable costs, no monthly outgoings
- Downside: Reduces net loan proceeds on day one; early redemption may not recover unused interest
Worked Example: £300,000 Bridge Over 6 Months
Scenario: Purchasing and refurbishing a 5-bedroom house for conversion to an HMO. Purchase price £300,000. No existing mortgage. Bridge term 6 months.
| Structure | Rate | Monthly Interest | Total Interest | Total Repayable |
|---|---|---|---|---|
| Monthly serviced | 0.75%/month | £2,250 | £13,500 | £313,500 |
| Rolled-up | 0.75%/month | Compounds | ~£13,800 | ~£313,800 |
| Retained (deducted upfront) | 0.75%/month | — | £13,500 | £313,500 |
Net proceeds with retained interest: £300,000 − £13,500 retained − £4,500 arrangement fee (1.5%) = £282,000 net day one
Rolled-up total: Slightly higher due to compounding on an increasing balance.
Note: these figures exclude valuation, legal and broker fees — see below.
Arrangement Fees
Most bridging lenders charge an arrangement fee of 1-2% of the gross loan. This is typically deducted from the loan on completion rather than paid upfront.
On a £300,000 loan:
– 1% arrangement fee = £3,000
– 1.5% arrangement fee = £4,500
– 2% arrangement fee = £6,000
Some lenders charge a flat minimum fee (e.g. £1,500 or £2,000) which can make smaller loans proportionally more expensive.
Exit Fees
Some lenders charge an exit fee of 0-1% of the loan on redemption. Not all lenders charge exit fees — this is an area where brokers negotiate actively on your behalf.
On a £300,000 loan, a 1% exit fee adds £3,000 to your costs on repayment. Over a 6-month deal, this is the equivalent of an additional 0.17% per month on top of your stated rate.
Always check whether an exit fee applies before comparing rates between lenders.
Legal Fees
Bridging transactions involve two sets of legal costs:
Lender's legal fees: Most lenders instruct their own solicitors and require the borrower to pay for this. Costs typically range from £1,000-£2,500 for a straightforward first charge bridge.
Your own legal fees: You will need independent legal advice. Budget £1,500-£3,000 for a standard deal, more for complex titles or leasehold properties.
Some lenders offer dual representation (one solicitor acts for both parties) which reduces costs, but this is less common on larger or more complex deals.
Valuation Fees
Lenders require an independent RICS valuation of the security. For HMO bridging deals that include a refurbishment or conversion, lenders typically require a desk-top or drive-by valuation of the current state plus a Reinstatement Value Certificate or a full report confirming the post-works value.
Valuation costs vary by property size and location:
– Standard residential valuation: £400-£800
– HMO-specific valuation with post-works assessment: £700-£1,500
– Large or complex properties: £1,500-£3,000+
Broker Fees
Specialist bridging brokers typically charge a procuration fee of 1-1.5% of the loan, payable on completion. For complex deals, some brokers charge an upfront application fee (£500-£1,000) which is credited against the completion fee.
Using a specialist broker typically more than pays for itself — they access lenders and rates not available directly, and can save time that would otherwise cost you additional months of interest.
True Cost Comparison: Rate vs Fee Trade-Off
It is common for lenders to offer a choice between a lower rate with a higher fee or a higher rate with a lower fee. The right choice depends on how long you expect to hold the bridge.
Example — 6-month bridge, £300,000:
| Option | Monthly Rate | Arrangement Fee | Exit Fee | Total Cost |
|---|---|---|---|---|
| A | 0.70% | 2% | 0.5% | £12,600 + £6,000 + £1,500 = £20,100 |
| B | 0.85% | 1% | 0% | £15,300 + £3,000 = £18,300 |
Option B is cheaper over 6 months despite the higher rate. If you held for 12 months, the calculation reverses.
Always model your expected hold period before choosing between rate and fee structures.
Summary: Total Cost Budget
For a typical 6-month HMO bridge of £300,000 at market rates, a realistic all-in cost budget looks like this:
| Item | Estimated Cost |
|---|---|
| Interest (0.80% × 6 months) | £14,400 |
| Arrangement fee (1.5%) | £4,500 |
| Exit fee (0.5%) | £1,500 |
| Lender legal fees | £1,500 |
| Your legal fees | £2,000 |
| Valuation | £1,000 |
| Broker fee (1%) | £3,000 |
| Total | ~£27,900 |
That represents approximately 9.3% of the loan amount over 6 months — a meaningful cost that must be factored into your deal appraisal from day one.
For a personalised cost illustration, contact The HMO Mortgage Broker.
Frequently Asked Questions
What monthly interest rate should I expect on HMO bridging finance?
Monthly interest rates for HMO bridging finance typically range from 0.55% to 1.2% per month (equivalent to 6.6% to 14.4% annually). The rate depends on: LTV, property type and condition, your experience, and the loan term. First-charge bridging on a standard residential property at 60% LTV will be at the lower end; second-charge or high-LTV lending will be higher.
What fees are charged on HMO bridging loans?
Typical fees include: arrangement fee (1-2% of loan value), exit fee (0-1%), valuation fee (£500-£2,000), legal fees for lender's solicitor (£1,000-£2,500), broker fee (0.5-1% or fixed fee), and potentially a drawdown fee for staged funding. Always calculate the total cost of the bridging loan including all fees, not just the headline interest rate.
Is bridging finance interest rolled up or paid monthly?
Both options are usually available. Rolled-up (retained) interest means the interest is added to the loan balance and repaid when the bridge is redeemed — useful during refurbishment when the property generates no income. Monthly serviced interest means you pay interest each month, which reduces the total cost but requires cash flow from another source.
How do I compare bridging finance offers for HMO projects?
Compare the total cost of each offer, not just the monthly rate. Calculate: total interest over the planned term, all arrangement and exit fees, valuation and legal costs, and any draw-down charges. Also consider: speed of completion, flexibility if you need to extend, and the lender's track record with HMO properties. A difference of 0.1% monthly rate over 6 months on a £200,000 loan is £1,200.