Bridge loan fees are often where borrowers get surprised—and where lenders build their real margins. Understanding the full cost breakdown before you commit is the difference between a profitable deal and one that eats into your returns.
The Base Origination Fee
Most bridge lenders charge an origination fee between 1% and 3% of the loan amount, though hard money lenders sometimes push toward the higher end. On a $500,000 bridge loan, that's $5,000 to $15,000 just to process the deal. This fee covers underwriting, processing, and initial due diligence. Some lenders bundle this into their yield; others charge it separately and explicitly. Ask whether it's built into the interest rate or on top of it—this changes your actual cost.
Interest Rates: The Core Cost You Can't Miss
Bridge loans typically run 8% to 15% annually, depending on your credit profile, deal risk, and market conditions. The math gets real fast: a $500,000 loan at 12% costs you $60,000 per year, or roughly $5,000 per month. Most bridge loans have short terms (6 to 24 months), so a 12-month bridge at 12% with 1% origination means you're paying approximately $65,000 in total costs before any prepayment penalties. Compare that against your profit margin on the project. If you're only clearing $40,000, this deal doesn't work—and that's exactly why fee transparency matters.
Points, Discount Points, and Lender Yields
Hard money lenders sometimes quote "points" instead of flat fees. One point equals 1% of the loan amount. A lender offering a loan at 10% interest plus 2 points on a $500,000 bridge is charging you $10,000 upfront plus $50,000 annually in interest. The points often drive the actual yield the lender needs to justify their risk and capital allocation. Discount points (where you pay upfront to lower the rate) exist in bridge lending but are uncommon—most borrowers want to preserve cash, not spend it.
Appraisal, Title, and Third-Party Fees
Beyond the lender's direct fees, expect to cover:
- Appraisal: $400–$1,000 (sometimes waived for experienced borrowers with strong track records)
- Title search and insurance: $500–$1,500
- Survey (if required): $300–$800
- Phase I environmental (for commercial/industrial): $1,500–$3,500
- Attorney/legal review: $800–$2,500
- Inspection and due diligence: $300–$1,200
These add up fast. On a bridge loan with $5,000 in lender fees and $6,000 in third-party costs, you're at $11,000 before a single interest payment. Budget for this.
Prepayment Penalties: The Hidden Cost
Some bridge lenders charge prepayment penalties if you pay off early—typically 1% to 3% of the remaining balance. This is a trap if your exit timeline improves. For example, if you expected a 12-month bridge but sold the property in month 8, and your lender charges a 2% prepayment penalty on a $500,000 loan, you're paying an extra $10,000 to exit ahead of schedule. Always negotiate a no-penalty or reduced-penalty clause, especially if your exit depends on market timing or a buyer contingency.
Late Fees and Default Costs
If you miss a payment, expect late fees of 5% to 10% of the monthly payment amount. Some lenders also charge daily default interest rates above the stated rate. On a $5,000 monthly payment, a 5% late fee is $250—plus the lender may charge 15% or higher annualized rates until you catch up. This is expensive debt to be late on.
What to Look For When Shopping Lenders
Compare total cost of capital across lenders, not just the interest rate. A lender charging 11% + 1% origination might be cheaper than one at 10% + 3% origination plus higher third-party fees. Ask each lender for a Loan Estimate showing all-in costs. Get responses in writing. If you're serious about scaling bridge lending deals, listing your business on Mercoly positions you to win repeat borrowers and build a reputation with consistent, transparent pricing.
Frequently Asked Questions
Q: What's the typical total cost of a 12-month bridge loan when you factor in all fees? On a $500,000 bridge at 12% interest with 1.5% origination and $4,000 in third-party costs, expect approximately $65,000 total—or 13% of the borrowed amount.
Q: Should I always choose the lowest interest rate? No—a lower rate with high points or origination fees might cost more overall. Compare the annual percentage rate (APR) and calculate the all-in cost over your expected hold period.
Q: Can I negotiate away prepayment penalties? Often yes, especially if you have strong credit, a proven track record, or you're bringing additional business to the lender—make it a priority in your initial pitch.
Use these breakdowns to build accurate underwriting models and win deals where your borrowers understand exactly what they're paying.