You've found the perfect house. The problem? Yours hasn't sold yet.
This scenario plays out thousands of times every week across the UK. You're ready to move up, relocate for work, or seize an opportunity. But your equity is locked in your current property. The property you want won't wait for your sale to complete.
A bridging loan solves this problem. It's short term finance secured against property, designed to "bridge" the gap between needing funds now and having them later.
Bridging loans sound exotic to people who've never used one. The reality is they're mainstream financial products used thousands of times daily across the UK by everyone from homeowners to property investors to businesses. Here's everything you need to know.
How Bridging Loans Work: A Plain English Explanation
Strip away the jargon and bridging loans are straightforward. The basic mechanics work like this:
- You need money now (to buy a property, seize an opportunity, complete a transaction)
- You have a clear way to repay later (sale proceeds, mortgage, incoming funds)
- A lender advances the money secured against property you own or are buying
- You pay interest monthly or rolled up
- You repay the loan when your "exit" happens (typically 3 to 18 months)
A Worked Example: Sarah's Chain Break
Sarah owns a house worth £400,000 with no mortgage. She's found her dream home for £500,000 but her house hasn't sold yet. The seller wants to exchange in 4 weeks.
The Bridge Solution:
- Lender provides £200,000 bridging loan secured against Sarah's current house
- Sarah combines this with her savings to buy the £500,000 property
- She moves into the new house and actively markets her old property
- Her old house sells 5 months later for £400,000
- Sale proceeds repay the £200,000 bridge plus £11,000 interest and fees
- Sarah nets £189,000 from the sale after repaying the bridge
Without bridging, Sarah would have lost the property. With bridging, she secured her dream home and repaid the loan when her sale completed. Total cost: £11,000. Total value: priceless (she's been wanting that house for 3 years).
The Key Question: Do You Have a Credible Exit?
Every bridging loan application comes down to this: how will you repay? If you can't answer this clearly and credibly, you shouldn't be borrowing. If you can, bridging might be exactly what you need.
Types of Bridging Loans
Not all bridging loans are the same. Understanding the different types helps you get the right product for your situation.
Open vs Closed Bridging
Closed Bridge
You have a confirmed exit date. For example, your property sale has exchanged with completion in 8 weeks, or you have a confirmed mortgage offer starting in 3 months.
Advantages: Lower interest rates (typically 0.55% to 0.75% per month) because the lender has certainty. Some lenders only offer closed bridges.
Open Bridge
You expect to exit within the term but no confirmed date. For example, your house is on the market but not yet under offer, or you're planning to refinance but haven't secured the mortgage yet.
Advantages: Flexibility on repayment timing. You're not locked to a specific date. Trade off: Higher rates (0.75% to 1.5% per month) due to the uncertainty.
First Charge vs Second Charge
First Charge Bridging
The bridging loan is the primary loan secured against the property. There's no existing mortgage, or any existing mortgage is being repaid as part of the bridge.
When used: Buying a new property, refinancing to release equity, or when you own your current property outright.
Second Charge Bridging
There's an existing first charge mortgage that remains in place. The bridge sits behind it in priority. If the property were sold, the first mortgage gets repaid before the bridging loan.
When used: You need capital but want to keep your existing low rate mortgage in place, or you can't redeem the first charge due to early repayment penalties.
Important: Second charge lending requires the first charge lender's consent. Not all will agree. Higher rates apply due to the subordinated security position.
Regulated vs Unregulated Bridging
Regulated Bridging
The property securing the loan is or will be occupied by you or a family member. Regulation under the Financial Conduct Authority provides consumer protection, including right to withdraw, affordability assessments, and clear disclosure requirements.
Timeline impact: Slightly slower (typically 2 to 3 weeks minimum) due to regulatory processes including 7 day reflection period.
Unregulated Bridging
Investment property, commercial property, or property you don't intend to occupy. No FCA regulation applies. Faster completion possible (5 to 7 days) with fewer procedural requirements.
Flexibility: Lenders have more discretion on criteria and can move faster on approvals.
What Can You Use a Bridging Loan For?
Bridging loans are remarkably versatile. Here are the most common uses we see:
Chain Break: Buy Before Selling
The classic use case. Your property hasn't sold but you've found somewhere you want to buy. Bridge against your existing property to fund the purchase, then repay when your sale completes.
Timeline: Typically 3 to 9 months. Most houses sell within this timeframe provided they're priced correctly.
Auction Purchase: Complete Within 28 Days
Property auctions require completion within 20 to 28 days of the hammer falling. Traditional mortgages can't move that fast. Bridging finance is the standard solution.
Process: Get bridging approval before the auction (Decision in Principle typically takes 48 hours). Bid with confidence. Complete on time. Refinance to mortgage later if keeping as investment.
Property Renovation: Light to Medium Refurbishment
You've bought a property needing cosmetic or structural work. Bridging provides the purchase funds and works budget. You repay through sale or refinance once works complete.
Typical works budget: Up to £100,000 to £150,000. Larger refurbishments usually require development finance instead.
Commercial Property Purchase: Time Sensitive Acquisition
Commercial mortgages take 8 to 12 weeks minimum. If you need to move quickly on a commercial opportunity, bridging provides fast funding. Refinance to commercial mortgage once the urgency passes.
Probate Property: Unlock Inheritance Quickly
You've inherited property but probate hasn't completed, or the estate needs capital to pay inheritance tax before you can access the property. Bridging can provide funds against the property you're inheriting.
Common scenario: Inheritance tax bill due within 6 months but probate takes 12+ months. Bridge against inherited property to pay HMRC, then repay when probate completes.
Tax Bill: Cover Unexpected Liability
You've received an unexpected tax demand and need capital quickly. If you own property, bridging can provide funds while you sell assets or arrange longer term financing.
Business Opportunity: Capital for Time Critical Deals
A time sensitive business opportunity requires capital you don't have liquid. If you own commercial or investment property, bridging against it can provide fast capital for the opportunity.
Bridging Loan Costs: Complete Breakdown
Let's be radically transparent about what bridging loans actually cost. Yes, they're more expensive than mortgages. But context matters: you're paying for speed, flexibility, and access to capital traditional lenders won't provide.
Interest Rates
Monthly Rates: 0.55% to 1.5% Per Month
Notice we quote monthly rates, not annual. A monthly rate of 0.75% annualises to 9%, which sounds expensive. But you're not borrowing for a year. Most bridges are repaid in 3 to 6 months.
What Determines Your Rate:
- LTV (loan to value): 50% LTV gets better rates than 75% LTV
- Property type: Standard residential gets best rates, unusual properties pay more
- Your credit: Clean credit gets 0.55% to 0.75%, adverse credit pays 1% to 1.5%
- Exit strategy: Strong, confirmed exits get better rates
- Loan size: Larger facilities often achieve slightly better rates
- Competition: Multiple lenders interested in your deal improves pricing
Arrangement Fee: 1% to 2%
Charged on the loan amount. On a £200,000 bridge, expect £2,000 to £4,000. This is typically added to the loan (you don't pay it upfront) and repaid with the loan at exit.
Some lenders charge 2% arrangement fee but offer lower monthly rates. Others charge 1% with slightly higher monthly interest. Look at total cost over your expected timeframe, not individual components.
Exit Fee: 0% to 1%
Some lenders charge an exit fee when you repay. Many don't. If a lender quotes 0.65% per month with a 1% exit fee, compare the total cost against a lender offering 0.75% with no exit fee over your likely timeline.
Valuation: £300 to £1,500+
Depends on property value and complexity. Standard house worth £400,000: £400 to £600. Large country estate or complex commercial property: £1,500 to £3,000+. You pay this upfront.
Legal Fees: £1,500 to £3,000+ Total
You pay for both your solicitor and the lender's solicitor. Budget £750 to £1,500 each side. Complex security or second charge situations cost more.
Worked Example: Total Cost of £200K Bridge
Scenario 1: 4 Month Bridge
- Loan amount: £200,000
- Interest rate: 0.75% per month, rolled up
- Arrangement fee: 2% (£4,000)
- Exit fee: 0%
- Valuation: £500
- Legal fees: £2,000
- Interest (4 months): £6,091
- Total cost: £12,591
- Effective cost: 6.3% over 4 months
Scenario 2: 8 Month Bridge
- Same loan amount and rate
- Interest (8 months): £12,435
- Total cost: £18,935
- Effective cost: 9.5% over 8 months
The longer you hold the bridge, the more it costs. This is why having a clear, realistic exit timeline matters. Optimistically assuming 3 months when reality is 8 months will cost you thousands in unexpected interest.
Debunking the "Expensive" Myth
Yes, bridging costs more than a mortgage. But compare the £12,591 cost of a 4 month bridge to the cost of losing your dream property: surveys already paid (£1,000), legal fees already incurred (£1,500), emotional cost of losing a property you've set your heart on, and having to start the search again.
In context, bridging often represents excellent value for solving a critical timing problem.
Bridging Loan Interest Explained
Bridging loans offer three ways to pay interest. Understanding each helps you choose the right structure for your cash flow.
1. Monthly Serviced Interest
You pay interest each month from your own funds, just like a mortgage. The loan balance stays constant. When you exit, you repay the original loan amount only.
Best for:
- People with income to support monthly payments
- Situations where you want to minimise total cost
- Longer term bridges (12+ months) where compounding matters
Challenge:
You need monthly income or reserves. On a £300,000 bridge at 0.75% per month, you're paying £2,250 every month.
2. Rolled Up Interest (Most Common)
Interest accumulates monthly and gets added to the loan balance. You make no monthly payments. The accumulated interest is repaid when you exit along with the loan.
Best for:
- People who want no monthly payments during the bridge
- Property investors with no rental income during works
- Anyone preserving cash flow for other priorities
Trade off:
Total cost is higher because you're paying interest on accumulating interest (compound effect). The difference is typically 3% to 5% of the loan amount over 6 months.
3. Retained Interest
Interest for the expected term is calculated upfront and deducted from the loan advance. You receive net proceeds (loan amount minus interest) on day one.
Example:
You borrow £200,000 for 6 months at 0.75% per month. Total interest: £9,097. Lender advances £190,903 (£200,000 minus £9,097). You repay exactly £200,000 at exit.
Best for:
Situations where you need absolute certainty on repayment amount, or where you're using the bridge for a specific transaction and can work with net proceeds.
Which Is Best?
Rolled up interest is most popular because most people using bridging don't want monthly outgoings. If you have income and want to save 3% to 5% on total cost, serviced interest is better. Retained interest is less common but useful for certain commercial situations.
How to Qualify for a Bridging Loan
Bridging loans are more accessible than traditional mortgages in many ways. But lenders still have criteria. Here's what they're actually assessing:
The Property Security
The property must be acceptable security. Most property types are fine: residential houses and flats, commercial premises, development sites, agricultural land.
Acceptable:
- Standard construction (brick, block, stone)
- Clear legal title
- Accessible location
- Value supported by comparables
- Mortgageable or sellable at exit
Challenging (but not impossible):
- Non standard construction (timber frame, concrete)
- Properties without kitchens or bathrooms
- Unmortgageable properties (needing works to become mortgageable)
- Properties with short leases (under 70 years)
- Ex local authority properties with restrictive covenants
Challenging properties can get funded but typically require specialist lenders, lower LTVs (50% to 60% instead of 70% to 75%), and higher rates.
The Exit Strategy
This is what lenders care about most. How exactly will you repay? Vague answers like "I'll probably sell" won't work. You need specifics:
Strong Exits:
- Your property sale has exchanged, completing in 8 weeks (closed bridge)
- You have a mortgage offer starting in 3 months (closed bridge)
- Your property is on market with active viewings, priced per recent comparables (open bridge)
- You're refinancing to mortgage once light works complete in 4 months
- Your business sale completes in 6 months, funds confirmed
Weak Exits That Trigger Declines:
- Property not yet on market with no agent instructed
- Property priced 20% above comparable evidence
- Relying on inheritance or expected windfall with no documentation
- Planning to remortgage but income doesn't support mortgage affordability
- No clear plan, just hoping something works out
Your Credit and Financial Standing
Bridging lenders are more flexible than mortgage lenders, but they still care about your financial background:
What helps:
- Clean credit history for the past 12 months
- Proof of deposit or equity
- Demonstrated property experience
- Clear explanation of any adverse credit
- Evidence you can afford the monthly interest (if servicing)
What won't necessarily stop you:
- Historic CCJs or defaults (over 3 years old)
- Self employed with complex income
- Previous property repossessions (if explained)
- Bankruptcy (if discharged over 3 years ago)
Adverse credit typically means specialist lenders, rates of 1% to 1.5% per month, and maximum 65% LTV. But funding is absolutely available for most situations.
Bridging Loan Risks and How to Manage Them
Bridging loans carry risks. Let's be honest about them and discuss how to mitigate each one.
Risk 1: Exit Failure
The risk: Your planned exit doesn't happen. Your house doesn't sell, your mortgage doesn't complete, your funds don't arrive.
Mitigation:
- Price property realistically based on recent comparables, not optimism
- Have a backup exit plan (if sale fails, can you refinance?)
- Build in time buffer (don't assume 3 months if 6 months is realistic)
- Understand extension options before you need them
- Choose regulated bridging if you need FCA protection
Risk 2: Costs Overrun
The risk: Your bridge takes longer than planned. Each extra month costs £1,500 to £3,000+ in interest you hadn't budgeted for.
Mitigation:
- Budget conservatively on timeline (add 50% to your optimistic estimate)
- Understand your lender's extension policy and costs upfront
- Maintain reserves to cover 3 to 6 months extra interest if needed
- Choose a lender with flexible extension terms, not just lowest headline rate
Risk 3: Property Value Drops
The risk: Property market falls during your bridge term. Your security value drops below the loan amount.
Mitigation:
- Don't over leverage (70% LTV leaves buffer for 30% value drop)
- Choose shorter bridge terms in uncertain markets
- Have alternative security or funds to inject if needed
- Remember: unrealised value drops only matter if you're forced to sell
Red Flags: When to Walk Away from a Bridging Loan
- Lender doesn't ask about your exit strategy (they should care)
- Headline rate looks unusually low but fees are excessive
- You're being pressured to proceed quickly without understanding terms
- You don't actually have a credible exit plan
- The only way you can afford it is if everything goes perfectly
The Bridging Loan Process: What to Expect
Understanding the timeline helps you plan properly and set realistic completion expectations.
Step 1: Initial Enquiry and Decision in Principle (24 to 48 Hours)
You provide basic details: property value, loan amount needed, exit strategy. We assess viability and provide an indicative quote. If suitable, lender issues Decision in Principle confirming they'll lend in principle subject to valuation and legal work.
Step 2: Valuation Instructed (3 to 7 Days)
Lender instructs RICS surveyor. Site inspection happens. Valuation report received. Provided valuation supports the loan amount, we proceed to legal stage.
Step 3: Legal Work (7 to 14 Days)
Lender's solicitor requests title documents and prepares security. Your solicitor reviews terms. Any legal issues are resolved. Loan agreement finalised.
Step 4: Completion (1 to 2 Days)
You sign loan documents. Lender releases funds to your solicitor. If you're purchasing, completion happens. If refinancing, existing charges are repaid and balance released to you.
Total typical timeline: 2 to 3 weeks for straightforward cases. For urgent situations with all documentation ready, we have lenders who can complete in 5 to 7 working days.
Frequently Asked Questions
Considering a Bridging Loan?
Talk to someone who arranges them daily. We'll tell you honestly whether bridging is right for your situation, what it will actually cost, and which lenders will provide the best terms for your circumstances.