However, in a departure from market norm the lender does not charge interest on the entire retained portion from day one, instead it charges interest as the money is released to the borrower's account.
A good case in point was where Precise Mortgages and another well known bridging lender were both quoting on a £1.9m deal over a term of 12 months. Both lenders were quoting a rate of 1.15% per month but even though the headline monthly rate looked the same the interest charged was £28,400 less with Precise Mortgages, a difference of 0.125% per month.
This was as a direct result of only charging interest as and when the money has been released to the borrower’s account rather than on the whole retained portion from day one.
Alan Cleary, managing director of Precise Mortgages said:
“Borrowers and indeed many brokers are probably not aware of the inconsistent nature of how interest is calculated by bridging lenders. If all bridging lenders applied the method we use it would save borrowers over £12 million per year in interest payments.
"We believe in being transparent and in treating customers fairly so that intermediaries can reliably advise their clients on the most appropriate course of action.
"I would recommend that all intermediaries carefully check the total amount repayable to ensure they are comparing like with like and ask the lender to confirm their interest charging policy if there is any doubt.”
