Bridge loan costs are higher than conventional financing, but they reflect the speed, flexibility, and shorter loan terms that make bridge lending useful for investment deals. Understanding the full cost picture, including rates, fees, and holding expenses, helps investors evaluate whether the financing makes sense before they commit to a project.
Interest Rates on Bridge Loans #
Bridge loans carry higher interest rates than long-term conventional loans. Rates typically range from around 9% to 12% or more, depending on the lender, the deal, and the borrower’s experience. Several factors influence where a rate lands, including:
- The loan-to-value (LTV) ratio
- The property type and condition
- The strength of the exit strategy
- The borrower’s track record in real estate investing
Furthermore, most bridge loans are interest-only, meaning the borrower pays only the interest each month and repays the full principal at loan maturity or upon exit.
Origination Points and Lender Fees #
In addition to the interest rate, lenders charge origination points at closing. One point equals one percent of the loan amount. Bridge lenders commonly charge between 1.5 and 3 points, though this varies by lender and deal structure. AHL also offers a 0 point option and a deferred point option, which can help investors manage upfront costs depending on their capital position. Other fees that borrowers should anticipate include:
- Appraisal or valuation fees
- Processing and underwriting fees
- Title and escrow costs
Additionally, AHL bridge loans carry no pre-payment penalty, meaning investors who exit early through a sale or refinance are not charged for paying off the loan ahead of schedule. As a result, investors should calculate total closing costs, not just the rate, when comparing bridge financing options.
How to Calculate Total Bridge Loan Cost #
To get a realistic picture of what a bridge loan will cost, investors should factor in all of the following:
- Monthly interest payments multiplied by the expected hold period
- Origination points paid at closing
- All third-party fees associated with closing
- Any extension fees if the loan term is extended
For example, a $300,000 bridge loan at 10% interest for six months costs roughly $15,000 in interest alone, before points and fees. Therefore, the total cost of capital is meaningfully higher than the rate alone suggests.
Why Bridge Loan Costs Can Still Make Sense #
Despite higher costs, bridge loans are often the most practical financing tool available for time-sensitive or distressed deals. In many cases, the speed of closing or the ability to finance a property that banks will not touch creates enough value to justify the cost. Additionally, investors who complete projects efficiently keep holding costs low, which reduces the overall impact of higher rates.
Summary #
Bridge loan costs include interest rates, origination points, and closing fees that together make short-term private financing more expensive than conventional alternatives. However, those costs reflect the flexibility and speed that make bridge loans valuable in competitive or complex investment scenarios.
Calculating the full cost of capital, not just the headline rate, gives investors a clearer picture of whether the financing fits the deal. AHL provides straightforward loan terms so investors can evaluate costs accurately before committing to a project.