What is the real cost difference between using a revolving credit facility 3 times a year vs bridging 3 times?

What is the real cost difference between using a revolving credit facility 3 times a year vs bridging 3 times?

For active UK buy-to-let landlords and property investors, securing quick, short-term capital is a normal part of doing business. Whether you are aiming to win properties at auction, fund rapid refurbishments, cover temporary void periods, or upgrade properties to meet new EPC standards, cash flow is king. Historically, most landlords turned to bridging finance or remortgaged their properties to release equity. Today, there is a modern alternative: a secured buy-to-let (BTL) revolving credit facility.

If you anticipate needing to borrow short-term funds three times within a single year, the choice of financial product will have a massive impact on your bottom line. Below, we break down the real cost differences between taking out three separate bridging loans versus using a single secured revolving credit facility three times.

The Repeat Cost Trap of Bridging Finance

Bridging finance is a highly effective tool for one-off property transactions, but it is not built for repetitive use. When you take out a bridging loan, you are starting a completely new mortgage application process from scratch. According to the MoneyHelper guide on bridging loans, these are specialized short-term options that require robust exit strategies.

Most bridging loans are structured as either open or closed. An open bridging loan has no firm exit date but typically carries a maximum term of 12 to 24 months. A closed bridging loan has a fixed repayment date, usually tied to a confirmed property sale. Crucially, bridging loans do not typically require monthly payments; instead, interest is rolled up and repaid at the end of the term. While this helps cash flow, the interest compounds over time.

If you use bridging finance three times in a single year, you must pay the setup fees three separate times. These repeat costs typically include:

• Arrangement Fees: Typically 1% to 2% of the total loan amount, charged by the lender each time you apply.
• Valuation Fees: The cost of hiring an independent surveyor to value the security property, payable for every single application.
• Legal Fees: You must cover both your own legal representation and the lender’s legal fees for every transaction.
• Exit or Redemption Fees: Some lenders charge administration fees to close the bridge.

When you multiply these costs by three, the friction and transactional expenses can severely damage your investment yields.

The Secured Revolving Credit Facility Alternative

A secured BTL revolving credit facility works like a property overdraft. This is a secured facility, meaning it is registered as a second charge against an existing residential buy-to-let property. It sits behind your first-charge mortgage, allowing you to keep your main mortgage rate untouched. This is not an unsecured business loan, credit card, or generic commercial line of credit.

Because it is a revolving facility, you only arrange the security once. After the initial setup, you are free to draw down funds, repay them, and draw them down again without ever having to reapply. Interest is only charged on the drawn balance, not the limit of the facility.

If you draw down funds three times in a year, your cost profile looks very different:

• Single Setup Cost: You pay the valuation, legal, and arrangement fees once at the start.
• Zero Repeat Fees: Subsequent drawdowns do not trigger new legal fees, arrangement fees, or valuation fees.
• Speed: Once arranged, future draws are typically processed in 24 to 48 hours.

The Real Cost Difference: A Practical Scenario

To understand the real cost difference between using a revolving credit facility 3 times a year vs bridging 3 times, let us look at a realistic scenario. Imagine a buy-to-let landlord who needs to borrow £50,000 three times in a year: once for an auction deposit, once to fund a light kitchen-and-bathroom refurbishment, and once to bridge a gap during a remortgage.

The Cost of Three Bridging Loans

For each £50,000 bridge, the landlord might face the following estimated fees:

• Arrangement Fee (2%): £1,000
• Valuation Fee: £450
• Lender and Borrower Legal Fees: £1,500

This amounts to £2,950 in setup fees per loan. Across three separate bridging loans, the landlord will pay roughly £8,850 in setup fees alone before interest is even calculated. Furthermore, because bridging interest is rolled up, the compounding interest can quickly accumulate during the months the loans are active.

The Cost of One Revolving Credit Facility

Now consider the alternative. The landlord arranges a secured second-charge revolving credit facility with a credit limit of £50,000. The setup fees are paid once:

• Arrangement Fee (2% of limit): £1,000
• Valuation Fee: £450
• Legal Fees: £1,500

The total setup fee is £2,950. For the second and third drawdowns, there are no arrangement fees, no new legal fees, and no additional valuations required. The landlord simply draws the £50,000, pays it back when the capital becomes available, and draws it down again. The setup cost remains £2,950.

In this scenario, the real fee difference is a saving of approximately £5,900 in favor of the revolving credit facility. Additionally, because interest is only calculated on the active balance daily, the landlord is not paying interest on funds they do not need.

Risk and Compliance Considerations

While a revolving credit facility offers clear cost advantages and speed, it is vital to understand the risks involved. Your property may be at risk if repayments are not made. Because this facility is secured as a second charge against your residential buy-to-let property, failing to maintain your repayments could lead to serious legal action, including repossession by the lender. Additionally, defaults may result in increased interest rates, administrative charges, and a negative impact on your credit history.

To keep an eye on your credit health before applying for any secured facility, you can check your credit profile online. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

Promise Money is an FCA-authorised broker (Ref: 681423), not a direct lender. We help landlords compare the market to find the right secured revolving credit facilities and bridging loans for their portfolios. You can read more about this product on our hub at promisemoney.co.uk/landlord-revolving-credit-100 or call our team directly on 01902 585020.

People also asked

What is a buy-to-let revolving credit facility?

It is a secured financial product that works like a property overdraft, allowing buy-to-let landlords to draw down, repay, and redraw funds up to an agreed limit. The facility is secured as a second charge against a residential buy-to-let property, sitting behind the primary mortgage.

Are there valuation fees for every drawdown on a revolving credit facility?

No, you typically only pay for a valuation once when the facility is initially established. Subsequent drawdowns do not require new property valuations, which helps save money and speeds up access to cash.

How quickly can I access money from a revolving credit facility?

Once the initial second-charge facility is set up and active, subsequent drawdowns can typically be requested and transferred to your bank account within 24 to 48 hours.

Can I use a revolving credit facility for auction property deposits?

Yes, because the funds can be drawn down in as little as 24 hours once established, it is an ideal tool for securing auction purchases without the delays associated with bridging finance.

Does a second-charge revolving credit facility affect my first mortgage?

It does not alter the terms or interest rate of your existing first-charge mortgage. However, you must obtain consent from your first-charge lender before the second charge can be registered.