What a bridging loan is — and what it isn’t
A bridging loan is a short-term secured loan, typically running from a few weeks up to 24 months. It’s designed to solve a specific problem: you need funds now but your longer-term finance isn’t in place yet, or a standard mortgage simply can’t move at the speed the situation requires.
The name comes from the idea of bridging a gap — between buying and selling, between purchase and refinance, between acquiring a property and making it mortgageable. Used for the right purpose and with a clear plan, they’re a genuinely useful tool. Used without proper planning, the costs can escalate quickly.
Bridging loans are always a short-term solution. The exit strategy — how you repay the loan — is the most important part of the conversation. We won’t recommend a bridging loan unless the exit is clear and credible.
When bridging loans make sense
Auction purchases
Buying at auction means committing to a 28-day completion from the fall of the hammer. Standard mortgages can’t reliably complete in that timeframe — valuations, underwriting, and legal work take time. Bridging lenders can move significantly faster, allowing you to secure the property and then refinance to a longer-term mortgage once it’s in your name.
If you’re planning to buy at auction, it’s worth speaking to us beforehand so finance is lined up before you bid, not after.
Breaking a chain
If you want to buy your next home before your current one has sold — perhaps because you’ve found something you don’t want to lose — a bridging loan can fund the purchase. When your existing property sells, the bridge is repaid. It removes the dependency on your sale completing in lockstep with your purchase, which is one of the most common causes of transaction stress.
Unmortgageable properties
Some properties can’t be mortgaged in their current condition — no kitchen, no bathroom, significant structural work needed, or simply in a state that no standard lender will touch. A bridging loan can fund the purchase and the refurbishment. Once the work is complete and the property is in a mortgageable condition, you refinance to a standard buy-to-let or residential mortgage. This is sometimes called a bridge-to-let or refurb bridge strategy.
Time-sensitive transactions
Sometimes the situation just requires speed. A motivated seller who needs to complete quickly, a short-notice tax or financial deadline, or simply a situation where the window of opportunity is narrow. Bridging lenders operate at a different pace to mainstream lenders — when the application is straightforward, completions in under a week are possible.
Open vs closed bridging loans
A closed bridge has a fixed repayment date — usually because there’s a clear event on the horizon, like an exchange on a property sale. Because the exit is certain, lenders tend to be more comfortable and pricing can be more competitive.
An open bridge has no fixed repayment date, up to a maximum term (usually 12 or 24 months). The exit is planned but not yet confirmed — for example, selling a property that’s on the market but not yet sold. Lenders are comfortable with this provided the exit is realistic, but the uncertainty is priced in.
Regulated vs unregulated
Whether a bridging loan is regulated by the FCA depends on what it’s secured against and who it’s for. If the loan is secured against a property you (or a close family member) currently live in or intend to live in, it will usually be regulated. If it’s secured against investment or commercial property, it’s typically unregulated.
Regulated bridging loans carry the protections that come with FCA regulation. Unregulated loans don’t — which doesn’t mean they’re unsafe, but it does mean the onus is on you to understand what you’re agreeing to. We will always be clear about which category applies before you proceed.
How bridging loans are priced
Unlike standard mortgages where rates are quoted annually, bridging loan interest is typically quoted per month. A rate of 0.75% per month sounds modest, but over 12 months that’s effectively 9% per year — before fees.
The total cost of a bridging loan includes:
- Monthly interest rate — applied to the outstanding loan balance
- Arrangement fee — typically 1–2% of the loan amount, often added to the loan
- Valuation fee — the lender will instruct their own valuer
- Legal fees — you pay your own legal costs and usually the lender’s too
- Exit fee — some lenders charge a fee on redemption; many don’t
Interest can be rolled up (added to the loan and repaid at the end) or serviced (paid monthly). Rolling up means no monthly payments during the term, which helps cash flow but increases the total cost. We always present the full cost comparison so you can make an informed decision.
Loan amount: £300,000 — 6 month term at 0.85%/month, rolled up
Monthly interest: £2,550
Total interest over 6 months: approximately £15,670 (compounded)
Arrangement fee (1.5%): £4,500
Total cost of finance: approximately £20,170 before valuation and legal fees
This is the kind of calculation we run before recommending a bridge — to make sure the numbers make sense for your situation.
How much can you borrow?
Most bridging lenders will lend up to 75% of the property’s value (loan to value) on a single security. Some will stretch to 80% for the right applicant. If you’re offering additional security — for example, charging another property you own — lenders can sometimes accommodate higher overall borrowing.
For refurbishment bridging, lenders often assess against the property’s end value once works are complete (called GDV or gross development value) rather than its current value — which can allow you to borrow more to cover the cost of works.
First and second charge bridging
A first charge bridge means the bridging lender has the primary security over the property — typically used when there is no existing mortgage on it.
A second charge bridge sits behind an existing mortgage. It’s more complex and usually more expensive, because the bridging lender is taking a secondary position. But it can be the right structure if you want to release value from a property without disturbing an existing mortgage — for example, to fund a deposit on a new purchase.
If you’re working to a deadline or have a time-sensitive situation, call us on 01277 564 054.
Our fees for bridging loan advice
No charge for initial conversations. A broker fee will apply depending on the complexity and size of the case — this is always confirmed and agreed clearly before you proceed. See our full fee schedule.
Frequently asked questions
A bridging loan is a short-term loan secured against property, designed to bridge a financial gap until longer-term finance is arranged or a property is sold. They typically run from one month to 24 months.
When speed is essential — buying at auction, breaking a chain, purchasing a property that needs work before it can be mortgaged, or completing a time-sensitive transaction where a standard mortgage can’t move fast enough.
Your plan for repaying the bridging loan. Lenders require a clear and credible exit from day one — typically the sale of a property, refinancing to a longer-term mortgage, or the completion of a development.
In straightforward cases, bridging loans can complete in days rather than weeks. Speed depends on the complexity of the security, the valuation, and how quickly legal work can be completed.
Bridging loans are priced monthly rather than annually. Costs include the monthly interest rate, an arrangement fee, valuation fees, and legal costs. We always present the full cost picture, not just the headline rate.
Some are — typically where the loan is secured against a property you or a close family member lives in. Commercial and investment bridging loans are generally unregulated. We will always confirm the regulatory status of any loan before you proceed.