How They Work, Costs, Timescales & When to Use Them
Bridging loans are short-term, fast-access finance used to “bridge the gap” between buying a property and securing longer-term funding such as a mortgage or sale. They are widely used for auctions, renovations, chain breaks, investment projects and situations where traditional mortgage lenders cannot move quickly enough.
This guide explains how bridging loans work, what lenders look for, typical rates and fees, when bridging finance is suitable, and how to avoid the most common mistakes.
What Is a Bridging Loan?
A bridging loan is a secured, short-term loan (usually 3–24 months) designed for speed and flexibility. Unlike traditional mortgages, bridging lenders focus more on the property, exit strategy and overall deal structure rather than strict affordability or credit history.
Key features:
- Fast completion — often within 5–14 days
- Interest can be rolled up (no monthly payments)
- Flexible lending criteria
- Can fund properties where a mortgage is not suitable
Common Uses for Bridging Finance
Bridging loans can be used for a wide range of property scenarios:
- Auction purchases
- Buying before selling (chain breaks)
- Refurbishments or conversions
- Heavy or light renovations
- Unmortgageable properties
- Development exit loans
- Below-market-value purchases
- Buying land or mixed-use property
For full development funding, see: Development Finance Guide
How Do Bridging Loans Work?
Bridging loans are typically secured against property or land. Lenders focus on three core factors:
- Loan-to-Value (LTV)
- Property value (current & projected)
- Exit strategy (how you will repay)
Bridging loans can be taken in your personal name, through a limited company or SPV. SPV structures are often popular for investors.
Types of Bridging Loans
- Regulated Bridging Loans: Used when the property is (or will be) your main residence.
- Unregulated Bridging Loans: Used for investment, commercial or business purposes. More flexible with faster processes.
- Light Refurbishment: For cosmetic upgrades, kitchens, bathrooms, etc. No structural changes.
- Heavy Refurbishment / Structural Bridging: For major works: extensions, lofts, reconfigurations, planning improvements, conversions.
- Development Exit Loans: Used to refinance short-term development funding while properties are being marketed or refinanced.
How Much Can You Borrow?
Typical LTV limits:
- Up to 75% LTV on a first charge
- Up to 100% of purchase price with additional security
- Up to 65% GDV for refurbishment or development-style bridges
Interest Rates & Fees
Bridging loan pricing varies based on loan size, property, exit plan and risk.
Interest Rates:
- From around 0.55%–1.2% per month (varies)
- Rolled-up, retained or serviced options
Typical Fees:
- Lender arrangement fee: usually 1–2%
- Valuation fee & Legal fees
- Broker fee (varies)
- Exit fee (sometimes 1%)
What Is a Bridging Loan Exit Strategy?
Your exit is how the bridging loan will be repaid. Lenders will only approve the case if the exit is realistic. Common exit strategies include:
- Sale of the property
- Remortgage onto a BTL mortgage
- Developer refinance
- Capital raise on another property
For rental exit strategies, see: Limited Company BTL
Credit History Requirements
Credit criteria are far more flexible than traditional mortgages. Many lenders accept Defaults, CCJs, Late payments, and Previous adverse credit.
Relevant guides:
- CCJs Guide
- Defaults Guide
Pros & Cons of Bridging Loans
| Pros | Cons |
| Extremely fast completion | Higher interest than mortgages |
| Flexible underwriting | Requires a solid exit plan |
| Funds unmortgageable properties | Fees can stack up |
| No early repayment charges (usually) | Legal process must be efficient |
Next Steps
Bridging loans can be a powerful tool when used correctly. They offer speed, flexibility and opportunities that standard mortgages cannot deliver — but they require a clear exit and careful structuring to avoid unnecessary cost.
You can explore related guides such as Development Finance, Limited Company BTL, or use our mortgage calculators for basic comparisons.
All mortgage advice is provided by FCA-regulated advisers. Your property may be repossessed if you do not keep up repayments on secured loans.
FAQs
How long can I take a bridging loan for?
Typically 3–24 months depending on the lender and exit strategy.
Do I need monthly payments?
Not always — interest can be rolled up and paid at the end.
Can I get a bridging loan with adverse credit?
Yes — many bridging lenders are flexible on credit history.
Is a bridging loan cheaper than a mortgage?
No — bridging is short-term and more expensive, but far faster and more flexible.
Can I use a bridging loan for an auction purchase?
Yes — bridging loans are one of the most common forms of auction finance.