Revolving Credit Interest Rates: Landlord Fees & Costs
Welcome to our specialist UK guide on revolving credit rates. Compare revolving credit interest rates, arrangement fees, and commitment costs for UK landlords. Discover daily accrual calculations and SPV tax deductions.
How is interest calculated on a revolving credit line?
TL;DR: Interest is calculated daily strictly on the active balance you draw down, never on your total approved limit. Borrowing margins typically range between 0.65% and 0.95% per month. When your drawn balance is zero, you pay zero borrowing interest.
Revolving Credit Rates: How Revolving Credit Interest Rates & Daily Calculations Work
In practice, daily calculation makes revolving credit significantly cheaper than traditional bridging loans. For example, if you hold a £500,000 facility but only draw £100,000 for 45 days, you pay interest solely on that £100,000 for exactly 45 days.
Furthermore, daily interest accrual stops the exact day you repay principal. Additionally, most lenders allow you to service interest monthly from rental cash flow or roll it up during active refurbishments. Therefore, your working cash flow remains protected.
What fees are associated with setting up a revolving credit facility?
TL;DR: Setup costs include an arrangement fee (typically 1.5% to 2.0% of the credit limit), valuation fees, and lender legal costs. In addition, some lenders charge an undrawn commitment fee of 0.5% to 1.0% annually, though active borrowers often secure waivers.
Upfront Arrangement, Commitment & Valuation Costs
Because a revolving facility remains open for 12 to 36 months, setup costs amortise across multiple profitable property transactions. Consequently, the cost per deal is far lower than paying repeated bridging arrangement fees.
For instance, desktop valuations can often reduce surveyor costs on standard residential assets. Furthermore, prime commercial lenders frequently waive commitment fees when borrowers achieve minimum annual draw targets. Therefore, total financing costs remain highly competitive.
Are interest and fees tax-deductible for limited company landlords?
TL;DR: Yes. When borrowing through a Limited Company SPV, 100% of revolving credit interest and arrangement fees are deductible as allowable business expenses. This full deduction shields your profits from Corporation Tax, unlike individual Section 24 restrictions.
HMRC Corporation Tax Relief for SPV Finance Costs
Under UK tax law, corporate borrowing costs are classed as legitimate business finance expenses. As a result, limited company landlords can offset every pound of revolving interest against rental income before calculating Corporation Tax.
In contrast, individual landlords face Section 24 restrictions with limited basic-rate tax credits. Therefore, structuring your revolving credit line inside an SPV corporate umbrella typically delivers significant annual tax savings.
Is there a penalty for early repayment of a drawn balance?
TL;DR: No. Revolving credit facilities feature 0% early repayment charges (ERCs) on drawn balances. You can repay borrowed capital whenever cash becomes available, immediately reducing your daily interest bill to zero without exit penalties.
Zero Early Repayment Charges & Penalty-Free Exits
Unlike fixed-rate mortgages that impose 1% to 5% exit fees, revolving credit offers total repayment freedom. Specifically, the entire facility design encourages landlords to draw, repay, and redraw dynamically.
Consequently, you can clear drawn balances using sales receipts, remortgage proceeds, or accumulated rental yields at any time. As a result, you retain absolute liquidity without penalty fears.
What is the cost comparison between revolving credit and a mortgage further advance?
TL;DR: A mortgage further advance may offer a slightly lower headline interest rate, but it takes 8 to 12 weeks to complete and locks you into full interest on day one. In contrast, revolving credit delivers 24-hour drawdowns, daily interest, and reusable limits.
Revolving Credit vs Further Advances Cost Analysis
While further advances suit slow, long-term capital needs, they fail in fast-moving property markets. For instance, mortgage advances require fresh valuations and full underwriting every single time you need funds.
In contrast, revolving credit requires only one initial setup. Once established, you draw capital in 24 hours and pay interest strictly during active project weeks. Therefore, total borrowing cost across multiple quick projects is substantially lower. Crucially, understanding these lending rules is essential when reviewing your revolving credit rates options.
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