How a bridging loan works
A bridging loan is secured against property and designed to be repaid quickly, usually within 12 months, though some lenders extend to 18 or 24 months for development or complex cases. Unlike a standard mortgage, you typically do not make monthly capital repayments. Instead, interest is either rolled up and paid in full when the loan is cleared, or retained (deducted from the advance up front), so your cash flow is not burdened during the term.
Because it is short-term, lenders focus primarily on your exit strategy: the credible, funded way you plan to repay the loan, such as completing a property sale, remortgaging onto a long-term deal, or receiving proceeds from a development. The clearer and more certain your exit, the lower the rate and the easier the application.
Funds can be available within days to a few weeks once a valuation and legal work are complete, which is why bridging suits time-critical purchases. A normal residential mortgage typically takes four to eight weeks to arrange; a bridging loan can fund an auction purchase within 28 days.
Bridging lenders assess deals individually. They look at the property value, the loan-to-value ratio, your exit strategy, and your overall financial position. Many will lend to borrowers with adverse credit history or complex income that would not meet high-street mortgage criteria, provided the security and exit are strong.
When a bridging loan makes sense
Bridging is not for everyday borrowing. It is a specialist tool for specific, short-term situations where speed or flexibility matters and where a clear repayment route exists.
The most common use for homebuyers is a broken or slow property chain. You have found your next home, exchanged contracts or found a property you urgently want, but your buyer has pulled out or your sale is delayed. Rather than lose the purchase, a bridge funds it temporarily until your sale completes.
Auction purchases are another major use. Properties sold at auction typically require completion within 28 days of the hammer falling. A standard mortgage cannot be arranged that quickly, but a bridging loan can. You then remortgage onto a normal deal within a few months.
Bridging is also used to buy unmortgageable properties: homes without a working kitchen or bathroom, properties in serious disrepair, or those with unusual construction. Once refurbished to a mortgageable standard, the bridge is repaid via a remortgage. Property developers and landlords regularly use this route.
Other scenarios include releasing equity for a deposit before a sale, buying land, funding planning gain, or covering a short cash-flow gap on a development project.
Typical bridging loan costs (2026)
Costs vary by lender, loan size, property type and the perceived risk. These are indicative UK market ranges.
| Cost item | Typical range | Notes |
|---|---|---|
| Monthly interest rate | 0.5% to 1.5% per month | Equates to roughly 6% to 18% annually; best rates for low-LTV, clear exits |
| Arrangement fee | 1% to 2% of loan | Usually deducted from the advance or added to the loan |
| Valuation fee | £300 to £1,500+ | Depends on property value and type; some lenders use desktop valuations for speed |
| Legal fees (lender) | £500 to £1,500+ | You pay the lender's legal costs in addition to your own |
| Legal fees (borrower) | £800 to £2,000+ | Conveyancing on the security property |
| Exit fee | 0% to 1% | Not all lenders charge; check before committing |
| Broker fee | 0% to 2% | A specialist broker is often essential for best rates |
| Administration / drawdown fees | £100 to £500 | Varies by lender |
Always compare the total cost over your expected term, not just the headline monthly rate. On a £300,000 bridge at 0.85% per month for six months, interest alone is around £15,300 before fees.
Open vs closed, first vs second charge
Understanding these distinctions helps you compare products and know what lenders are assessing.
A closed bridge has a defined repayment date backed by a confirmed event, such as a property sale where contracts have exchanged. Because the exit is known, the risk to the lender is lower and rates are better. An open bridge has no fixed exit date: you intend to repay but the timing is not certain. Open bridges carry higher rates and lenders scrutinise the exit more carefully.
A first charge bridge is secured on a property with no existing mortgage. The lender has first claim on proceeds if you default, making it lower risk and better priced. A second charge bridge sits behind an existing mortgage. If you default, the first charge lender is repaid first, leaving the bridging lender with a weaker position. Second charge loans are available but at higher rates and stricter criteria.
There is also an important regulatory distinction. A regulated bridging loan is secured on a residential property where you or a close family member live or plan to live. It comes under FCA regulation and full consumer protections, including a cooling-off period. An unregulated bridge is secured on investment or commercial property and is not governed by FCA consumer rules, so you must be more careful about terms.
Gross vs net loan and loan-to-value
When a lender quotes a bridging loan, the gross amount is the total debt including rolled-up interest and all fees. The net amount is the cash you actually receive after those deductions. This distinction matters because lenders cap the loan as a percentage of the property value (loan-to-value, or LTV), and that cap is usually applied to the gross figure.
Most bridging lenders will lend up to 70% to 75% LTV on a first charge basis. Some specialist lenders go to 80% for certain borrowers or properties. At 70% LTV on a £400,000 property, the gross loan is up to £280,000, but if £20,000 of fees and interest are rolled in, you receive only £260,000 in cash.
Always confirm the net figure you will receive and check it covers what you need before you commit to the arrangement fee or legal costs, which you will often pay even if you do not proceed.
How to arrange a bridging loan
The process moves faster than a mortgage but still has important stages to work through.
1. Define your exit clearly
Before approaching a lender or broker, pin down exactly how and when you will repay. Lenders need a realistic, evidenced exit: a sale agreed, a remortgage letter of intent, or confirmed development proceeds.
2. Approach a specialist broker
Bridging is a specialist market with hundreds of lenders, many not available direct. A good broker compares the whole market, finds the best rate for your risk profile and helps package the application.
3. Get a valuation
The lender will instruct a RICS-qualified valuer to assess the security property. Some lenders use automated desktop valuations for speed, though most require a physical inspection for complex or high-value properties.
4. Legal work runs in parallel
Your solicitor and the lender's solicitor work simultaneously on title checks, searches and the loan agreement. Using a solicitor experienced in bridging speeds this up considerably.
5. Receive the offer and drawdown
Once the lender is satisfied with valuation and legal work, they issue a formal offer. You sign, the funds are released, and the loan is registered as a charge on the property.
6. Execute your exit and repay
Complete the sale, draw down a remortgage or sell the asset. The bridge, including all rolled-up interest and any exit fee, is repaid in full from those proceeds.
Your exit is everything
Bridging only works if your repayment route is realistic and achievable within the loan term. If your property sale falls through or a remortgage is refused, interest continues mounting and you risk losing the security property. Before borrowing, identify a credible plan B, consider whether fixing the chain or negotiating timelines would be cheaper, and never rely on rising house prices alone as an exit strategy.
The real risks of bridging finance
The cost of bridging escalates quickly. At 1% per month, a £250,000 loan costs £2,500 in interest for every month it runs. If delays push a six-month bridge to nine months, that is an extra £7,500 in interest, before any extension or default fees.
Lenders can and do charge default fees if the loan runs past its agreed term, typically an additional margin on top of the contracted rate. Some lenders charge exit fees; others have minimum interest periods, meaning you pay for a full three or six months even if you repay early.
Because the loan is secured against property, you are at real risk of repossession if you cannot repay. This applies even if the secured property is your home. Always take independent legal advice and use an FCA-authorised broker before committing to a bridging loan.
Finally, be aware that some bridging lenders and brokers are not FCA regulated for unregulated deals. Check FCA registration before proceeding, particularly for any loan secured on a property you live in, which should always be regulated.