Bridging Loan Costs and Fees in Australia
A bridging loan costs more than the interest rate suggests. On a typical $650,000 facility over six months, interest is roughly $27,625, but establishment, legal and valuation fees can add another $13,000 or so, taking the real total closer to $41,000.
This page sets out every cost involved, with typical ranges, and works a full example end to end so you can see the total rather than the headline.
The components are interest, an establishment fee of roughly 1% to 2.5% of the loan, legal fees, a valuation, sometimes a monthly line fee, sometimes an exit fee, and default interest if you run past the term. Most are capitalised or deducted from the loan rather than paid upfront, and the whole lot is repaid at exit. Model your own figures with the bridging loan calculator.
What does a bridging loan actually cost?
Here is a complete worked example, using indicative bridging loan interest rates. Scenario:
A borrower needs $650,000 against a $1,000,000 property, an LVR of 65%, for six months.
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Interest at 8.5% p.a. capitalised: $27,625
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Establishment fee at 1.5% of the loan: $9,750
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Legal fees, lender and borrower: $2,500
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Valuation: $1,200
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Total cost of the facility: approximately $41,075.
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Total repayable at exit: approximately $691,075, assuming interest and fees are capitalised rather than paid during the term.
Expressed as a percentage, that is 6.3% of the loan amount over six months, which annualises to roughly 12.6%. The headline rate was 8.5%.
That gap between the advertised rate and the true annualised cost is the single most important thing to understand about short-term finance. It is not a criticism of the product, it is arithmetic: fixed fees spread over a short period cost proportionally more than the same fees spread over thirty years.
Why a shorter term can cost proportionally more
Borrowers often assume a shorter loan is always cheaper. In dollar terms it is. As a rate, it can be considerably worse, because the fixed fees do not shrink with the term. Same $650,000 facility, three months instead of six:
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Interest at 8.5% p.a.: $13,813
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Fees, unchanged: $13,450
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Total cost: approximately $27,263
Fees now make up 49% of the total cost, against 33% on the six month version. The effective annualised cost rises from about 12.6% to roughly 16.8%, despite the identical interest rate.
The practical takeaway: on very short facilities, negotiate the fees rather than the rate. On longer ones, the rate matters more. Ask every lender for the all-in dollar figure over your expected term, not the percentage.
All figures illustrative, using simple interest. Some lenders compound monthly. Actual costs depend on the lender, the security, the LVR and the complexity of the transaction.
Want the real total for your scenario? Send us the property value, your existing mortgage balance, the amount you need and your expected timeframe. We will come back with the full dollar cost including every fee, so you can compare lenders on the same basis. Request a cost estimate.
Every bridging loan cost, explained
Interest
Usually the largest single component. Most bridging facilities capitalise interest, meaning it is calculated daily, added to the loan balance monthly, and repaid in full at exit. That removes any monthly repayment obligation but means the balance grows through the term, which lifts your LVR. See capitalised interest explained.
Establishment fee
Typically 1% to 2.5% of the loan amount. Covers loan structuring, credit assessment, documentation and processing. On larger facilities the percentage often reduces, so it is worth asking. This is usually the second largest cost after interest and the one most worth negotiating on short terms.
Legal fees
Typically $1,000 to $5,000 or more. Covers documentation for both lender and borrower. Cost rises with the number of securities, the complexity of the structure and any priority or consent arrangements with an existing mortgagee.
Valuation fees
Typically $500 to $3,000 or more. Driven by property type, location and urgency. A standard metropolitan house is at the low end. Commercial property, development sites, rural security or an urgent turnaround sit at the top, and multiple securities mean multiple valuations.
Line fees and ongoing fees
Typically 0.1% to 0.5% per month where they apply. More common on commercial bridging and higher-risk transactions than on straightforward residential facilities. Worth checking, because a monthly percentage compounds the effect on a longer term.
Exit or discharge fees
Charged by some lenders when the facility is repaid, either as a fixed amount or a percentage of the loan. Not all lenders charge them, and where they do they can sometimes be negotiated at the outset. Always ask what it costs to leave before you sign to arrive.
Default interest
Typically an additional 2% to 4% or more per annum if the facility runs past the agreed term. This is why a realistic term with a genuine buffer matters more than shaving the initial rate. Ask what the default rate is and when it starts applying. See bridging loan exit strategies.
Brokerage
Where a brokerage fee applies it is disclosed to you in writing before you proceed, along with any commission arrangements. Ask any broker how they are paid and by whom.
Other disbursements
Title searches, settlement or account fees, mortgage registration and discharge costs. Individually small, collectively worth a line in your budget.
Do you pay bridging loan fees upfront?
In most consumer scenarios, no. Costs are generally handled one of two ways:
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Capitalised into the loan, added to the balance and repaid at exit.
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Deducted from the gross loan proceeds, so you receive the net amount at settlement.
Both matter for the same reason: if fees come out of the loan, the amount you actually receive is less than the amount you borrow.
Work backwards from the net funds you need, not the headline facility size, or you will end up short at settlement. Valuation fees are the common exception and are often payable upfront, since the lender incurs that cost before approval.
What determines your total cost?
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Loan-to-value ratio. The largest driver of pricing. Lower LVR, lower cost.
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Loan amount. Larger facilities often attract a lower percentage establishment fee.
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Term. Longer terms cost more in dollars but often less as an effective annual rate.
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Security type. Prime residential is cheapest. Commercial, land, development sites and specialised assets price wider.
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Loan purpose. Consumer and commercial facilities are assessed and priced differently.
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Mortgage position. First mortgage prices better than a second mortgage.
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Exit strength. A contracted sale prices better than an unlisted property.
How to reduce your bridging loan costs
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Lower the LVR. Contributing cash or borrowing less moves pricing further than negotiating does.
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Negotiate the establishment fee on short terms. Where the facility runs three to six months, the fee is a larger share of your total cost than the rate is.
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Use the strongest security you have. Prime residential attracts the best pricing and the cheapest valuations.
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Evidence the exit before you apply. Listed or contracted beats appraised.
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Build a buffer into the term. An extension plus default interest costs far more than a slightly longer term agreed at the start.
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Ask for the all-in figure. Request the total dollar cost over your expected term from every lender, then compare those numbers rather than the rates.
Costs versus interest rates
The interest rate is the cost of the money. The total cost includes everything else. On short-term finance the two can diverge sharply, as the worked examples above show: an 8.5% facility can carry a real annualised cost of 12.6% over six months or 16.8% over three. This is also why a comparison rate, which is designed for long-term amortising loans, is close to meaningless on a bridging facility. Compare total dollars. See current bridging loan interest rates alongside this page for the full picture.
Questions to ask any bridging lender
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What is the total dollar cost over my expected term, including every fee?
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What is the establishment fee, and does it reduce on a larger facility?
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Are fees capitalised, deducted from the loan, or payable upfront?
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What net funds will I actually receive at settlement?
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Is interest simple or compounded, and is it calculated daily or monthly?
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Is there a line fee or any ongoing monthly charge?
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Is there an exit or discharge fee?
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What is the default rate, and from what date does it apply?
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What does an extension cost, and is one available?
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If I repay early, is there a minimum interest period?
That last one catches people out. Some facilities carry a minimum term, so repaying in two months on a six month facility does not always mean paying two months of interest.
Related guides
Frequently asked questions
How much does a bridging loan cost in Australia?
On a $650,000 facility over six months at 8.5% p.a., expect roughly $27,625 in interest plus about $13,450 in establishment, legal and valuation fees, a total near $41,000. That is approximately 6.3% of the loan over the term, or about 12.6% annualised.
What is a typical bridging loan establishment fee?
Commonly 1% to 2.5% of the loan amount, often reducing as a percentage on larger facilities. It is usually the second largest cost after interest.
Do I pay bridging loan fees upfront?
Usually not. Fees are generally capitalised into the loan or deducted from the gross proceeds, so you receive net funds at settlement. Valuation fees are the common exception and are often payable in advance.
Are bridging loan costs paid monthly?
Typically no. Most facilities are structured so interest and fees are repaid in a single amount at exit, which is what allows borrowers to carry two properties without a monthly repayment.
What is default interest on a bridging loan?
An increased rate that applies if the facility is not repaid by the agreed date, commonly an additional 2% to 4% or more per annum. Ask what the rate is and when it begins before you sign.
Is there an exit fee on a bridging loan?
Some lenders charge one, either fixed or as a percentage. Others do not. Where it applies it can sometimes be negotiated at the outset, so ask what it costs to exit before you commit.
Why is the effective cost higher than the interest rate?
Because fixed fees are spread over a short term. Establishment, legal and valuation costs on a three month facility represent a much larger annualised percentage than the same fees on a thirty year mortgage. It is arithmetic rather than a hidden charge.
Do all lenders charge the same fees?
No. Fee structures vary significantly by lender, deal complexity and risk profile. Two facilities at the same headline rate can differ by thousands in total cost.
Can bridging loan costs be refinanced at settlement?
Yes. In most cases the total, including capitalised interest and fees, is repaid or refinanced when the exit event settles.
Is there a minimum interest period?
Some facilities have one, meaning early repayment does not necessarily reduce the interest charged. Confirm this before signing if you expect to exit early.
Get the full cost for your scenario
Every bridging facility prices differently, and the only number that matters is the total you repay at exit. We compare bridging options across Australia from a panel of bank, non-bank and specialist lenders, and we will give you the all-in dollar figure rather than a headline rate. Contact our team for a cost estimate on your transaction, or read more about our brokerage.