A bridging loan is a short-term finance product designed to bridge the gap until an asset can be sold or until longer-term finance can be arranged.
How much can I borrow with a Bridging Loan?
Bridging loan lenders may lend up to 75% on a single asset. This can be more if other assets are included as additional security — for example, if you are willing to incorporate other properties into the deal.
What will my monthly payments be?
Most bridging lenders will be comfortable retaining or rolling the interest payments, deducting them from the loan or adding them to the loan. This can help with short-term cash flow. You can also choose to make monthly payments, called 'servicing the debt'.
How much deposit do I need for a Bridging Loan?
The minimum deposit on a single asset is usually at least 25%. This can be less if you are willing to include other assets in the deal for the lender to take security on.
What is the process to apply for a Bridging Loan?
- Initial enquiry and formal application
- Agreement in principle with terms and conditions
- Lender due diligence (borrower checks, valuations)
- Formal loan offer and acceptance
- Legal documentation
- Completion of the loan
- Repayment of the loan via your exit strategy
How long will it take to arrange a Bridging Loan?
By design, a bridging loan is arranged quickly. The average bridging loan takes around 1–2 weeks to complete.
What fees will I need to pay?
Typical fees include a valuation fee, arrangement or facility fee (can usually be added to the loan), and legal fees.
What are the risks of taking a Bridging Loan?
Risks include not being able to execute your exit strategy and overrunning the original term. In this instance, lenders may charge penalties, a higher interest rate, or even repossess the asset. It is important to consider your options very carefully and take independent legal advice.
FAQs
What is a bridging loan exit strategy?
Your exit strategy explains how you will repay the loan — typically by selling the property, arranging a longer-term mortgage, or refinancing.
What types of property can a bridging loan be used on?
Most property types can be considered — houses, commercial property, pubs, restaurants, shops, and even land. This includes properties that might be considered unmortgageable by mainstream lenders.
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