Bridging Loan Guide | A bridging loan offers fast, short-term finance for time-sensitive property needs. This guide explains how bridging loans work, what they cost and when you should use one. You will learn key risks, lender requirements and alternatives to bridging finance.
What Is a Bridging Loan?
A bridging loan is a short-term secured loan used to fill a financial gap. Bridging finance is common in the UK property market when buyers need fast funding. The loan is secured against a residential or commercial property owned by the borrower. Bridging loans provide immediate access to funds when traditional mortgages are too slow. The lender takes a legal charge over the property until the loan is fully repaid. Failure to repay the bridging loan can lead to repossession of the secured property. You can explore long-term alternatives in our residential mortgages section
When Is a Bridging Loan Useful?
A bridging loan is useful when you need fast property finance. Buyers often use bridging finance for auction purchases with strict completion deadlines. A bridging loan also helps when you buy before selling your current home. It supports refurbishment projects that require quick access to funds. Property investors use bridging loans for conversions, heavy renovations, and development projects. These situations demand fast, flexible finance that traditional lenders cannot offer.
A bridging loan works well when timing is critical and your strategy requires short-term funding. If you need alternative options, view our Development Finance Guide.
How Does a Bridging Loan Work?
| Category | |
|---|---|
| Closed Bridging Loans | A closed bridging loan has a fixed repayment date. The date usually matches your property sale or refinance. This loan is less risky because the exit date is clear. Closed loans suit buyers with confirmed timelines. |
| Open Bridging Loans | An open bridging loan has no fixed repayment date. You must provide a strong and realistic exit plan. Lenders view open loans as higher risk. Higher risk may increase interest costs. Open loans suit buyers with flexible completion plans. |
| First Charge Bridging Loans | A first charge loan is secured against a property without an existing mortgage. The lender holds the primary legal charge. First charge loans usually offer lower rates due to reduced risk. These loans suit borrowers needing higher loan amounts. |
| Second Charge Bridging Loans | A second charge loan is placed behind your current mortgage. The lender holds a secondary legal charge. Second charge loans often have higher interest due to lender risk. These loans suit borrowers who want to keep their main mortgage. |
| Loan Terms | Most bridging loans run for three to 24 months. Terms vary by lender and loan purpose. Short-term suits auction purchases or chain breaks. Longer terms suit refurbishment or development projects. |
| Borrowing Amounts | Many lenders offer loans up to 70 to 80 per cent loan-to-value. LTV depends on property condition and location. Strong assets may secure higher borrowing limits. Your borrowing amount depends on the lender’s criteria and valuation. |
Typical Bridging Loan Costs
Bridging loan costs are higher than standard mortgages because the financing is short-term. Most bridging loans charge interest monthly rather than yearly. Interest rates usually range from 0.5 to 1.5 per cent per month, depending on risk. These monthly rates equal 6 to 18 per cent per year when viewed as an annual cost. Rates vary based on your exit strategy, credit profile and property type.
Most lenders charge an arrangement fee of 1 to 2 per cent of the loan amount. This fee is often added to the loan and repaid at completion. Bridging lenders also require a professional valuation of the security property. Valuation fees depend on the property size and value. Legal fees apply to you and the lender, and can vary widely.
Some lenders add an exit fee, often set at 1 per cent, when you repay the loan. Exit fees are more common with open bridging loans due to higher risk. Admin fees, broker fees and title checks may also increase total costs. Bridging loan costs highlight the importance of a strong exit plan. A reliable exit strategy reduces interest charges and avoids repayment delays. Clients should always compare costs across several lenders before choosing a loan. You can also review refinancing options through our remortgage advice page for long-term alternatives.
Eligibility Criteria for Bridging Loans
Lenders assess your property, credit history and repayment plan. A strong exit strategy is the most essential requirement. Your exit plan may involve selling the property or refinancing the mortgage. Most lenders need at least 20 to 25 per cent equity in the security property. Regulated bridging loans must follow FCA rules. Unregulated bridging loans, used for investment, do not follow the same rules.
Benefits of Bridging Loans
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Fast approvals and quick access to funds
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Useful for time-sensitive purchases
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Suitable for properties needing refurbishment
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Flexible terms compared with standard mortgages
Risks of Bridging Loans
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Costs are higher than traditional mortgages
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Repayment delays can create financial pressure
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Your property is at risk if you fail to repay
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Open loans carry higher uncertainty
Alternatives to Bridging Loans
You may consider either a standard mortgage or a second-charge mortgage. You can also consider development finance for heavy projects. If you have existing equity, remortgaging may provide the funds you need. Our mortgage services page explains long-term lending options.
How to Choose a Bridging Loan Adviser
Choose an adviser who specialises in bridging finance. Ask about their experience with auction, refurbishment and investment cases. Check if they work with whole-of-market lenders.
Request a full breakdown of interest, fees and legal costs. Confirm how they plan to support your exit strategy. Review client feedback to assess their service quality.
You can find a specialist bridging loan broker through our internal broker directory.
Thank you for reading our “Bridging Loan Guide UK | Short-Term Property Finance ” publication. Stay “Connect“-ed for more updates soon!
Bridging Loan FAQs
| FAQ Question | Answer |
|---|---|
| How quickly can a bridging loan be completed? | Many bridging loans complete within days. Completion depends on valuation, legal work and lender checks. |
| Can I get a bridging loan with poor credit? | Yes. Some lenders accept poor credit if your security is strong and your exit strategy is clear. |
| What is the maximum term for a bridging loan? | Most bridging loans run for three to twenty-four months. Longer terms depend on the lender’s risk appetite. |
| How much can I borrow with a bridging loan? | You may borrow from £25,000 to several million. The amount depends on the property value and the loan-to-value. |
| Is a bridging loan regulated in the UK? | Bridging loans for residential use are regulated by the FCA. Investment bridging loans are normally unregulated. |
| What interest rates apply to bridging loans? | Rates range from 0.5 to 1.5 per cent per month. The rate depends on property type, equity and loan purpose. |
| What fees are included in bridging loan costs? | You may pay arrangement fees, valuation fees, legal fees and exit fees. Fees vary between lenders. |
| Do I need an exit strategy for a bridging loan? | Yes. Lenders require a clear exit strategy, such as property sale or long-term refinancing through a mortgage. |
| Can I get a bridging loan for auction property? | Yes. Bridging loans suit auction deadlines because they release funds quickly for fast completion. |
| Can a bridging loan cover property refurbishment? | Many lenders allow refurbishment and light development. Heavy work may need development finance. |
| Can I use a bridging loan to buy before selling? | Yes. Bridging finance is often used to complete a purchase before your current property sells. |
| What properties qualify for a bridging loan? | Most residential, commercial and mixed-use properties qualify. Condition and value influence lender decisions. |
| Do lenders check income for bridging loans? | Some lenders check income, but many focus more on property value and your repayment plan. |
| Can I repay a bridging loan early? | Yes. Many loans allow early repayment. Some lenders may charge an early repayment fee. |
| Does a bridging loan affect my credit score? | Delayed repayment may affect your credit score. Timely repayment usually avoids credit issues. |
| Can first-time buyers use a bridging loan? | Yes, but lenders expect strong security and a clear exit plan. Advice from a specialist is essential. |
| Can I use multiple properties as security? | Yes. Some lenders allow cross-charging to increase the total loan amount. |
| Can I refinance a bridging loan into a mortgage? | Yes. Many borrowers refinance into a residential or buy-to-let mortgage. See our remortgage advice page. |