Short answer: speed costs money, underwriting shortcuts create surprise fees, and product choice matters. If you need cash in days or weeks to secure a purchase, complete a refinance or hit a development milestone, lenders who promise rapid delivery often charge rates and fees that quickly make a deal uneconomic. This article explains the trade-offs, compares the common options, and shows practical ways to stop costs running away.
3 key factors when choosing fast property finance under tight deadlines
What should you focus on when comparing fast finance offers? There are three straightforward priorities that determine whether a deal survives the numbers, or collapses under unexpected charges.
- All-in cost and timing - What is the headline rate and what are the real costs once fees and rolled-up interest are added? For example, a bridging loan at 1% per month on £250,000 costs £2,500 a month in interest. If arrangement fees are 1.5% (£3,750) and there is an exit fee of 1% (£2,500), a three-month hold costs £13,750 in total - 5.5% of the loan. Exit certainty - How confident are you that you can repay on time? Lenders often charge extension fees of 0.5% to 1% per month or enforce early repayment penalties. If your plan relies on a refinance or sale within 90 days, an extension can double your predicted finance cost and wipe out profit. Security and flexibility - What loan-to-value (LTV) and security do they require? Who controls draws, retention, or staged releases? A lender who takes full first charge and demands fixed draws may block a swift refinance or add legal costs of £1,500-£3,000 if they require charge removal before exit.
Ask yourself: how many days do I have? Can I accept a higher month-to-month cost to get certainty? What is my plan B if exit slips from 90 to 180 days?
Bridging loans and short-term mortgages: the common approach, true costs and risks
Most fast finance needs in UK property are met by bridging loans or short-term mortgage products. They are marketed as quick - sometimes funds same day or within 7-14 days - but the detail matters. Below is a practical look at what you pay and where borrowers commonly get caught out.
Typical fee and rate structure
- Monthly interest: 0.6% to 1.25% per month (7.2% - 15% pa). For example, 1%/month on £300,000 = £3,000/month. Arrangement fee: 1% to 2.5% up front. On £300,000 that is £3,000 - £7,500. Exit fee: 0% to 2% of loan. On £300,000 that is £0 - £6,000. Valuation, legal and monitoring: typically £500 - £3,000 each, depending on complexity.
Say you take a £300,000 bridging loan at 1%/month for 4 months with 1.5% arrangement and 1% exit fees. Interest = £3,000 x 4 = £12,000. Arrangement = £4,500. Exit = £3,000. Add £1,500 legal and valuation. Total cost = £21,000 or 7% of the loan for four months. Annualised that is roughly 21% pa - not a small cost.
Where costs spiral
- Extension charges. If your exit extends from 4 months to 7 months, extra interest = £3,000 x 3 = £9,000 and potential extension fee of 1% = £3,000. That doubles the planned cost. Roll-up interest. Many bridging loans roll interest into the loan. If interest is capitalised, you pay interest on interest. Conditional clauses. Some lenders add fees for early repayment or require a minimum term fee equal to 3 months' interest even if you exit earlier. Valuation shortfalls. If the lender's valuation is lower than expected, your LTV changes and you may need to inject extra cash or pay higher rates on a lower LTV band.
In contrast, regulated mortgages aimed at owner-occupiers may have lower headline rates but take longer to process and have stricter affordability checks - not useful if you need funds in 7-10 days.
Modern alternatives: development exit finance, joint-venture equity and private capital markets
What if you want speed without the full bridging price tag? Several alternatives exist that trade different elements of cost, control and speed. Which fits depends on the stage of your deal and how much equity you can afford to give up.
Development finance with staged draws
- Typical cost: 0.6% to 1.25% per month on drawn funds; arrangement 2% - 3%; monitoring fees £1,200 - £3,000. LTV on GDV commonly 60% - 75%. Pros: Interest charged only on drawn funds, controlled draws reduce wasted interest. Lenders familiar with construction milestones mean smoother exits to mortgages or sales. Cons: Draw conditions and snagging checks can delay payments by weeks. If your timeline is days, development finance is not fast enough.
Joint-venture equity or private investors
- Typical cost: gives up 20% - 50% of profit or an equity stake; sometimes structured as preferred return 8% - 12% plus share of upside. Pros: Can be very fast - funds from a known investor in days; often flexible on structure and security. Cons: You dilute profit. On a £200,000 projected profit, giving 30% to an investor costs you £60,000 in foregone return.
Private money and specialist matching platforms
- Typical cost: 8% - 20% pa depending on risk; arrangement fees 1% - 3%; quick deployment in days if borrower has track record and security. Pros: Speed and pragmatic underwriting. Less red tape than mainstream banks. Cons: Higher rates than many development lenders. Some private lenders add profit-share clauses that can be expensive on large gains.
In contrast to traditional bridging, a JV or private investor may look more expensive on paper because of equity share, but it can preserve cash flow and avoid crippling monthly interest if the project timeline is uncertain.
Other viable options: vendor finance, mezzanine loans, peer lending and crowdfunding
There are more ways to source short-term money. Each has specific cost drivers and speed trade-offs. Which of these is realistic for your deal?
- Vendor finance - Vendor agrees to carry part of the purchase price. Cost typically 4% - 8% pa. Pros: can be very fast and reduce upfront borrowing. Cons: relies on seller willingness and may limit future refinancing options. Mezzanine finance - Subordinated debt sits between senior debt and equity. Cost often 12% - 18% pa plus equity kicker of 10% - 30% of profit. Pros: plugs funding gaps without immediate equity dilution. Cons: heavy cost and often demands personal guarantees. Peer-to-peer and marketplace lending - Rates from 6% - 14% pa, quicker than banks but slower than private money in some cases. Pros: transparent pricing on platforms. Cons: LTV caps and platform credit policies can limit availability. Crowdfunding equity - Sell equity stakes to many investors. Pros: large amounts can be raised. Cons: slow to set up and you dilute ownership; marketing costs can be several thousand pounds.
Similarly, comparing these options shows you can often swap cash cost (high monthly interest) for equity cost (reduced future profit). Which is preferable depends on your appetite for dilution versus immediate cash outgoings.
Quick practical comparison table
Product Typical cost Speed Typical fees (on £250,000) Notes Bridging loan 0.6% - 1.25%/month Days - 2 weeks Arrangement £2,500 - £6,250; Exit £2,500 Fast but expensive for long holds Development finance 0.6% - 1.25%/month on drawn funds 2 - 6 weeks Arrangement £5,000 - £7,500; Monitoring £1,500 Good for staged builds Private JV equity 20% - 50% of profit (or 8% - 12% preferred) Days - 2 weeks Legal/set-up £2,000 - £5,000 Fast, dilutes upside Mezzanine 12% - 18% pa plus equity kickers 2 - 4 weeks Arrangement 1% - 3% High cost, fills LTV gaps Vendor finance 4% - 8% pa Immediate if seller agrees Negotiated Often overlooked but effectiveHow to choose the right fast finance route for your deal
Which option is best? The right choice balances timing, total cost and how much control you are willing to give up. Here are practical steps that keep the numbers under control and avoid nasty surprises.
Quantify the true cost in pounds - Don't rely on headline rates. Calculate total interest for the likely hold period plus arrangement and exit fees. Example: £250,000 at 1%/month for 6 months with 1.5% arrangement = interest £15,000 + arrangement £3,750 = £18,750 total. Stress-test your exit - What if your refinance takes twice as long? Model costs at 3, 6 and 9 months. If extension costs add more than £5,000, look for alternatives. Negotiate caps - Try to cap extension fees or set a maximum total fee. Lenders often allow caps for experienced borrowers or with larger loans. Match product to the actual problem - If you need to bridge an exchange completion within 7 days, a fast bridging lender is appropriate. If you need staged funding for construction over 12 months, development finance is cheaper overall. Consider a hybrid approach - Use a short 30-day bridge at lower LTV to secure the purchase, then move to development finance or a mortgage refinance. This can save thousands versus a long bridging term at high monthly cost. Work with a specialist broker - Good brokers know which lenders will accept tight timelines without punitive small-print. Their fee of £1,000 - £3,000 is often offset by saved interest and avoided penalties.Ask: what is my worst-case scenario? Can I cover an extra £8,000 in interest if the exit slips? If the answer is no, you need a plan that avoids roll-up interest or gives you contingency cash.
Practical tips that save real money
- Agree a clear exit plan in writing with your lender and attach it to the loan offer where possible. Use interest reserves or staged draws to avoid paying interest on undrawn sums - this can cut financing costs by thousands. Keep valuations and surveys scheduled in advance. A delayed valuation can add 2-3 weeks and thousands in interest. Avoid adding too many lenders on one property - legal fees to discharge and re-register charges often cost £1,500-£3,000 per lender.
Clear summary: what to pick and when
If you need cash in days to exchange on a purchase: choose a bridging loan or private lender, but plan for high monthly cost - expect to pay £2,000-£4,000 per month on a £200,000 - £400,000 loan, plus arrangement fees of £2,000-£7,500. Lock in exit terms and caps where possible.
If you need funds for construction over months: use development finance with staged draws. Although arrangement fees are higher, you only pay interest on what you draw. Expect monitoring and snagging checks that cost time but save interest in the long run.
If your priority is preserving cash flow or avoiding high monthly interest: consider JV equity or vendor finance. These routes cut monthly outgoings but reduce your share of profits - often giving up 20% to 40% of upside.
What if you are unsure about timelines? Build a contingency buffer in the budget equal to 3 months' interest and fees. For a £300,000 bridging loan at 1%/month, that buffer is around £9,000 plus a further £3,000 for minor fees - £12,000 total. That number will tell you if the deal still makes sense.
In contrast to lender marketing that promises "rates from X%", always run the numbers in pounds and stress-test your exit. The difference between a deal that makes £50,000 and one that loses £10,000 often comes down to realistic modelling of fees and realistic timelines.
Final question to ask before you sign
Can I afford the finance if my exit takes twice as long as planned? If the answer is no, change the plan now - either add contingency equity, pick a different product, or secure a partner. Fast finance is possible, but only when you treat speed and Visit this website cost as linked variables and plan for slippage in days and in pounds.
