What is a bridging loan?
A bridging loan is short-term finance secured on property, designed to cover a gap of a few weeks to around 18 months.
It's priced monthly rather than annually — typically 0.55% to 1.5% a month — and repaid in one lump sum from an agreed exit, usually a sale or a mortgage.
Speed is the whole point: bridging can complete in five to fourteen days, which is why it dominates auction purchases and broken chains.
How does bridging finance work?
The lender secures a first or second charge over property, checks the value and, critically, tests your exit strategy — how you will repay.
Interest is often rolled up or retained rather than paid monthly, so nothing leaves your pocket during the term and the whole balance clears at the end.
Here's a fictional example:
Meet Raj, buying at auction
Raj wins a £200,000 property at auction with 28 days to complete — far too fast for a buy-to-let mortgage.
He takes a £150,000 bridge at 0.85% per month with a 2% arrangement fee, completing in nine days.
Four months later, after a £25,000 refurbishment, he refinances onto a standard mortgage. Interest of roughly £5,100 plus a £3,000 fee is the cost of a deal he otherwise could not have done.
What types of bridging loan are there?
Closed bridge
Used when the exit date is certain — typically contracts already exchanged on a sale.
Cheapest form of bridging because the lender's risk window is defined.
Open bridge
No fixed repayment date, just a credible exit within the term.
More expensive, and lenders scrutinise the exit plan much harder.
First and second charge bridges
A first charge sits ahead of all other lending on the property; a second sits behind an existing mortgage.
Second charges cost more because recovery is riskier for the lender.
Development and refurbishment bridge
Funds released in stages as works complete, for renovation or light development.
Exit is usually a sale or a refinance onto a term mortgage once the property is habitable.
When is a bridging loan the right tool?
Bridging earns its cost in situations like these:
- 1
Auction purchases
Completion in 28 days is standard at auction and conventional mortgages rarely move that fast.
- 2
Broken chains
Buy the next property before the current one sells, then repay from the sale proceeds.
- 3
Unmortgageable property
No kitchen or bathroom means no standard mortgage — bridge, refurbish, then refinance.
- 4
Time-critical business need
Releasing equity quickly for a tax bill or a purchase with a hard deadline.
What do bridging lenders require?
Underwriting focuses on the asset and the exit rather than income:
A clear exit strategy: The single most important factor. Sale, refinance or another defined source of repayment.
Suitable security: Property to lend against, usually up to 70% to 75% loan to value.
A deposit or existing equity: You need meaningful skin in the game; 100% bridging is effectively unavailable.
Legal representation: Both sides use solicitors, and you typically pay the lender's legal costs as well as your own.
Experience for development cases: Refurbishment and development bridges favour borrowers with a track record.
How to compare bridging loans
Bridging pricing is complicated on purpose. Check all of this:
- 1
Monthly rate and how interest is charged
Retained, rolled up or serviced monthly each produce a very different net advance and total cost.
- 2
Arrangement and exit fees
1% to 2% arrangement is normal; an exit fee of 1% on top is not, and is worth negotiating away.
- 3
Total cost over your real timeline
Model the likely months, not the minimum. A cheap rate over nine months can beat a headline deal over four.
- 4
Speed and certainty of funding
A lender that funds in ten days at a slightly higher rate beats a cheaper one that misses an auction deadline.
- 5
Early repayment terms
Look for no minimum term or a short one, so repaying early actually saves you money.
Bridging loan pros and cons
Pros
- Funds in days rather than months
- Works on property no mortgage lender will touch
- Interest can roll up with nothing to pay monthly
- Judged on the asset and exit, not just income
Cons
- Expensive compared with term lending
- Fees stack up quickly
- Property is at risk if the exit fails
- Extending beyond term triggers penalty rates
Why is the exit strategy so important?
A bridge is only as safe as its repayment plan. If the sale falls through or the refinance is declined, you are holding expensive debt with a deadline.
Sensible borrowers build in a buffer: assume the sale takes longer than hoped, and check in advance that a term lender will actually refinance the property in its finished state.
Where an exit depends on a sale, price the property to move rather than to test the market — an extra two months of bridging interest wipes out a hopeful asking price.
What happens if I can't repay on time?
Running past the agreed term usually triggers a default rate, often two to three times the original monthly rate, which compounds quickly.
Some lenders will grant a short extension for a fee if the exit is genuinely imminent, so tell them early rather than waiting for the deadline.
If no exit materialises the lender can appoint receivers and sell the property, and your home or investment asset is lost.
What are the alternatives to bridging?
Cheaper options are worth checking first:
Fast-track mortgage
Some lenders offer accelerated completion. Slower than a bridge but a fraction of the cost.
Second charge secured loan
Longer term and lower rate where the need isn't measured in days.
Development finance
For substantial building work, staged development funding is usually better structured than a bridge.
FAQs
About this guide
Written and reviewed by the Grow Your Business team, and kept up to date as rates, rules and provider terms change.
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