Definition: what is a bridging loan?
A bridging loan is a short-term, secured loan used to 'bridge' a gap in funding. The loan is secured against property — usually the property you're buying or already own — and is repaid in one go at the end of the term, not through monthly capital repayments.
Bridging exists because property transactions and refurbishment projects don't fit the timing of long-term mortgages. A residential mortgage offer takes weeks; an auction completion deadline can be 28 days. A property may be unmortgageable until it's refurbished; you can't refurbish until you own it. Bridging fills these gaps.
Because bridging is short-term and the cost of capital is short-dated, rates are quoted per month, not annually. A 1% monthly rate sounds higher than a 5% mortgage rate — but for a 6-month loan, you're only paying interest for 6 months, not 25 years.
When bridging makes sense
- Auction purchases — 28-day completion deadlines that no mortgage lender can meet
- Chain breaks — buy your next home before your current one sells
- Refurbishment — properties that aren't mortgageable in their current state
- Development exit — repay expensive development finance while units sell
- Commercial property — speed and flexibility traditional commercial mortgages can't match
- Capital raising — fast access to equity for time-sensitive opportunities or tax bills
If your situation needs days, not weeks — and you have a credible plan for repayment — bridging is often the right tool.
How bridging is priced
| Cost component | Typical range |
|---|---|
| Monthly interest rate | 0.55%–1.5% per month |
| Arrangement fee | 1–2% of loan amount |
| Valuation fee | £500–£2,500+ (property-dependent) |
| Legal fees (lender's & yours) | £1,500–£5,000+ |
| Exit fee (some lenders) | 0–1% |
| Broker fee (if applicable) | Disclosed up front |
Always look at the total cost of finance over the expected term — not just the monthly rate. A higher rate with no exit fee may be cheaper than a low rate with a 1% exit charge.
Regulated vs unregulated bridging
Regulated bridging is secured against a property you live in or intend to live in. It falls under FCA regulation, so the lender must apply affordability rules, give you a binding offer document, and follow conduct rules.
Unregulated bridging is secured against investment, commercial, or development property. It's outside FCA scope, which means lenders can move faster and underwrite more flexibly — but you don't have the same statutory consumer protections.
Most homeowner-related bridging is regulated; most landlord, developer or commercial bridging is unregulated. Read more on our bridging finance page.
Why exit strategy matters
The lender doesn't make money from monthly payments — they make it from the loan being repaid in full at the end. So they assess your exit strategy as carefully as the property itself.
The four main exits are: sale of the secured property, refinance to a long-term mortgage, refurbishment then sale, or development exit. Read our dedicated guide to bridging loan exit strategies.
Frequently asked questions
Tell us about it — we'll match you to specialist bridging lenders and aim to respond the same business day.
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