How to Compare Bridging Loan Quotes: Rate, Fees, and Total Cost

Why Quote Comparison Matters in Melbourne

On a typical $2 million bridging loan in Melbourne's inner suburbs, the difference between a well-structured quote and a poorly disclosed one can exceed $50,000 over a 6-month term. Yet many borrowers focus solely on the monthly interest rate, missing the bigger picture.

Melbourne's bridging market includes major banks, regional lenders, and private non-bank lenders. Each structures their quotes differently. Banks often advertise lower headline rates but layer in valuation, legal, and discharge fees. Private lenders may quote higher rates but bundle fees or offer more flexible terms that reduce total cost for short-term loans.

What to Compare: The Complete Checklist

1. Interest Rate Structure

Bridging loan rates in Melbourne typically range from 6.5% to 12% per annum depending on LVR, property type, and lender. But the way interest is calculated matters:

• Monthly in arrears: Most common. Interest calculated on outstanding balance.
• Capitalised interest: Added to loan balance monthly — increases total cost but preserves cash flow.
• Prepaid interest: Some private lenders require 3-6 months upfront.

2. Fee Breakdown

Request a written fee schedule. Common fees include:

• Establishment/Setup fee: 1-2% of loan amount ($20,000-$40,000 on $2M)
• Monthly service/admin fee: $100-$300 per month
• Valuation fee: $500-$1,500 per property
• Legal fees: $1,500-$3,000 (borrower and lender sides)
• Exit/discharge fee: $500-$1,500
• Extension fees: If you need more time

3. Loan Terms and Flexibility

Compare:

• Minimum term: Some lenders charge 3 months minimum interest even if you repay early
• Maximum term: Typically 6-12 months for bridging
• Extension options: Cost and process if your sale delays
• Early repayment: Any penalties for paying out before term
• Interest rate resets: Fixed vs variable during loan term

4. Security and LVR Requirements

Different lenders have different security requirements:

• Maximum LVR: 65-80% depending on lender and property type
• Security types accepted: Residential, commercial, vacant land, or mixed-use
• First vs second mortgage: Some private lenders accept second mortgages; banks typically don't
• Cross-collateralisation: Using multiple properties as security

At-a-Glance: Bank vs Private Lender Quotes

How to Calculate Total Cost of Borrowing (TCB)

Here's a practical example for a $1.5 million bridging loan over 4 months:

Quote A: Bank Lender

• Interest rate: 7.5% p.a.
• Establishment fee: 1% ($15,000)
• Monthly service fee: $150
• Valuation fee: $800
• Legal fees: $2,500

Interest cost: $1,500,000 × 7.5% × (4/12) = $37,500
Total fees: $15,000 + ($150 × 4) + $800 + $2,500 = $18,900
TCB: $37,500 + $18,900 = $56,400

Quote B: Private Lender

• Interest rate: 10.5% p.a.
• Establishment fee: 1.5% ($22,500)
• Monthly service fee: $250
• Valuation fee: $600 (bundled)
• Legal fees: $2,000 (bundled)

Interest cost: $1,500,000 × 10.5% × (4/12) = $52,500
Total fees: $22,500 + ($250 × 4) + $600 + $2,000 = $26,100
TCB: $52,500 + $26,100 = $78,600

In this example, the bank quote saves $22,200. But if the private lender can settle 2 weeks faster and you secure the property, the extra cost may be worth it. This is why TCB alone isn't the only factor — timing and certainty matter too.

Red Flags in Bridging Loan Quotes

• Vague fee schedules: "Legal fees TBD" or "valuation at cost" without caps
• No early repayment terms: Unclear if you can exit early without penalty
• Hidden extension fees: No disclosure of what happens if you need more time
• Interest rate ambiguity: "From X%" without clarity on what determines your actual rate
• Undisclosed commissions: Ask directly: "Are there any commissions or referral fees included?"

Questions to Ask Every Lender

1. What is the all-in Total Cost of Borrowing for my scenario?
2. What is the minimum interest period, even if I repay early?
3. How long does approval and settlement typically take?
4. What security and valuations do you require?
5. What are the extension terms and costs if my sale delays?
6. Are there any prepayment penalties or lock-in periods?
7. What documentation do you need upfront for a firm quote?

When to Choose What

Choose a bank lender when:

• You have 3-4 weeks before settlement
• Your LVR is under 70%
• You have strong serviceability
• Minimising total cost is your priority
• You don't need specialised security arrangements

Choose a private/non-bank lender when:

• You need approval within days, not weeks
• Your LVR is 75-80%
• Serviceability is tight or complex
• You need a second mortgage or specialised security
• Speed of settlement matters more than rate

The Bottom Line

Comparing bridging loan quotes isn't about finding the lowest rate — it's about finding the right structure for your timeline and exit strategy. A quote with a 7% rate that takes 4 weeks to settle may cost you the property. A 10% quote that settles in 5 days may be the difference between winning and losing.

Always calculate the Total Cost of Borrowing. Always ask about timing. And always have your exit strategy clear before you sign. The best bridging loan isn't the cheapest — it's the one that gets you to settlement on time with the lowest total cost for your specific scenario.