What is a bridging loan?
A bridging loan is a type of short-term, secured borrowing that is used to "bridge" a financial gap — most commonly between the purchase of a new property and either the sale of an existing one or the arrangement of longer-term finance. The loan is secured against property or land as collateral, and it is designed to be repaid quickly, typically within 3 to 24 months.
Unlike a standard mortgage, which involves a detailed affordability assessment tied to your income, bridging finance is primarily asset-led. Lenders focus on the value of the security and the credibility of your exit strategy — the plan for repaying the loan at the end of the term.
Key characteristics
- Short-term — typically 1 to 24 months
- Secured against property or land
- Asset-led underwriting, not income-driven
- Interest is often rolled up or retained, not paid monthly
- Speed is a defining feature — completions can happen in days
Bridging loans are a mainstream tool in the UK property market. They are used by homebuyers, landlords, property developers, and businesses alike. When circumstances demand speed or flexibility that a conventional mortgage cannot offer, a bridge is often the answer.
How does a bridging loan work?
The mechanics of a bridging loan are straightforward. You borrow a lump sum secured against property. Interest accrues over the loan term. At the end, you repay the capital plus interest in full — either by selling the security property or refinancing onto a term product.
- 01
Enquiry & indicative terms
You contact a lender or broker. Within 24 hours you typically receive an indicative term sheet showing the proposed loan amount, rate, fees, and any key conditions.
- 02
Formal application & valuation
A formal application is submitted alongside documentation. The lender instructs an independent RICS-registered valuer to assess the security property.
- 03
Credit & legal due diligence
The lender reviews the application, valuation, title, and your exit strategy. Solicitors on both sides handle the legal charge documentation.
- 04
Offer & drawdown
Once satisfied, the lender issues a formal offer. Upon acceptance and legal completion, funds are drawn down — often within days of the offer being issued.
- 05
Loan term & exit
You use the funds for your intended purpose. At the agreed term end (or earlier if your exit is ready), you repay the loan in full via your exit strategy.
Interest handling
Open vs closed bridging loans
All bridging loans fall into one of two categories depending on how certain the exit is.
| Closed Bridge | Open Bridge | |
|---|---|---|
| Exit certainty | Fixed exit date confirmed (e.g. exchange of contracts) | Exit known but date not yet fixed |
| Typical term | Up to 12 months | 1 to 24 months |
| Rate | Usually lower — lender risk is reduced | Slightly higher — lender has more uncertainty |
| Typical use | Completion of a property sale already exchanged | Auction purchase, planning uplift, development exit |
A closed bridge is the lower-risk option for lenders because the repayment date is already defined — for example, you have exchanged contracts on a sale and simply need to complete on the purchase before the sale proceeds arrive. An open bridge is more common and more flexible: you have a credible exit plan but the exact repayment date is not yet contractually fixed.
First charge vs second charge
Costs and fees
Bridging finance is more expensive than long-term mortgage borrowing — but it is priced for speed and flexibility, not longevity. Understanding the full cost picture before you proceed is essential.
| Cost | Typical Range | Notes |
|---|---|---|
| Interest rate | 0.55% – 1.5% per month | Varies by LTV, security type, and loan size. Quoted monthly, not annually. |
| Arrangement fee | 1% – 2% of loan | Charged by lender. Sometimes added to the loan. |
| Exit fee | 0% – 1% of loan | Not all lenders charge this. Check term sheets carefully. |
| Valuation fee | £500 – £2,500+ | Depends on property value and type. Paid upfront. |
| Legal fees | £1,000 – £3,000+ | Borrower typically pays both sides' legal costs. |
| Broker fee | 0% – 1% of loan | Charged by the introducer/broker. Often negotiable. |
The most important figure to calculate is the total cost of the bridge — not just the monthly rate. Work backwards from your exit: if you expect to repay after six months, the cost of a 0.75% per month bridge on £500,000 is approximately £22,500 in interest alone, before fees. Your broker should provide a full cost illustration before you proceed.
Note
Common use cases
Bridging loans are used across a broad range of property and business scenarios. The common thread is always the same: conventional finance is too slow, too inflexible, or unavailable for the situation at hand.
Breaking a property chain
Purchase your onward property before your current home has sold, then repay the bridge from the sale proceeds.
Auction purchases
Auction completions require funds within 28 days — well within bridging timeframes, but impossible for standard mortgages.
Refurbishment & light development
Fund a refurbishment project on an unmortgageable property, then refinance onto a buy-to-let mortgage or sell.
Planning gain
Purchase land or property, obtain planning permission to increase its value, then sell or refinance at the higher value.
Below-market-value purchases
Move quickly on a discounted asset where the seller requires a fast unconditional exchange and completion.
Business capital
Release equity from commercial or residential property to fund a business opportunity without disposing of the asset.
Eligibility
Bridging lenders assess applications primarily on the quality of the security and the robustness of the exit strategy. Affordability in the traditional mortgage sense is secondary. That said, lenders still perform credit checks and expect borrowers to be able to service the debt or demonstrate that rolled-up interest is comfortably within the loan-to-value.
Typical eligibility criteria
- ✓UK or international borrower (individual, company, LLP, SPV accepted by most lenders)
- ✓Property or land in England, Wales, Scotland, or Northern Ireland as security
- ✓Loan-to-value typically up to 75% (some lenders up to 80% on residential)
- ✓Credible and evidenced exit strategy — sale, refinance, or development exit
- ✓No minimum income requirement for rolled-up or retained interest structures
- ✓Adverse credit considered on a case-by-case basis by specialist lenders
- ✓Minimum loan size typically £100,000; no upper ceiling for the right proposition
Regulated vs unregulated bridging
Next steps
If you think bridging finance could be right for your situation, the best starting point is a conversation with a specialist. At APF, we work directly with a panel of regulated and unregulated lenders and can provide indicative terms within 24 hours — with no obligation.
To understand bridging finance in greater depth — including how lenders structure deals, how to negotiate terms, and the full legal process — read our comprehensive deep-dive guide.
Before you enquire, have these to hand
- —Details of the security property — address, type, current value, and tenure
- —Loan amount required and intended purpose
- —Your proposed exit strategy and indicative timeline
- —Any existing charges on the security property
- —Brief overview of your background and experience (particularly for development or commercial transactions)
Frequently asked questions
What is the difference between a bridging loan and a mortgage?
A mortgage is a long-term product (typically 2–30 years) assessed primarily on the borrower's income and affordability. A bridging loan is short-term (1–24 months), assessed primarily on the value of the security property and the credibility of the exit strategy. Bridging loans complete far faster — often within days — and are used when speed or flexibility is required that a mortgage cannot provide.
How quickly can I get a bridging loan?
Indicative terms can be provided within 24 hours of enquiry. For a straightforward transaction with clean title, a valuation and legal work can complete in 5–10 working days. The fastest completions in the UK market are 24–48 hours, though these are exceptional and require all parties to move simultaneously. Complex transactions should be budgeted at 3–6 weeks.
How much can I borrow with a bridging loan?
Most lenders will advance up to 70–75% of the open market value of the security property (the loan-to-value, or LTV). Some lenders go to 80% on residential property for strong applications. The minimum practical loan size with specialist lenders is typically around £100,000, with no upper ceiling for the right proposition and security.
Can I get a bridging loan with bad credit?
Yes, in many cases. Bridging lenders are primarily asset-led — the weight given to credit history varies significantly between lenders, but adverse credit (CCJs, defaults, missed payments, even discharged bankruptcy) does not automatically result in a decline. The rate offered may be higher and the maximum LTV lower, but specialist lenders exist specifically for borrowers with complex credit profiles.
Do I need to make monthly payments on a bridging loan?
Not necessarily. Most bridging loans offer rolled-up interest (interest is added to the loan balance and repaid in full at exit) or retained interest (the full term's interest is deducted from the advance at drawdown). Both options mean no monthly payments during the term. A serviced option, where you pay interest monthly, is also available and typically comes at a lower rate.
What happens if I cannot repay the bridging loan on time?
The first option is to request an extension from the lender before the term expires. Most lenders will grant a short extension if the exit is credible and imminent — extension fees typically run to 0.5–1% of the loan. If repayment cannot be made and no extension is agreed, the lender has the right to enforce its legal charge, which in practice means appointing a receiver and selling the security property. This outcome is avoidable with early communication and proper exit planning.