Guide 01
How Bridging
Finance Works
Everything you need to understand before using bridging finance for the first time.
What is bridging finance?
Bridging finance is a short-term, property-secured loan designed for speed. Where a traditional mortgage might take 8–12 weeks to arrange, a bridging loan can complete in days. The loan is secured against property — commercial, residential investment, land, or mixed-use — and is repaid in full at the end of the term, typically within 1 to 24 months.
It's called "bridging" because it bridges a gap — between buying a property and arranging longer-term finance, between auction purchase and renovation completion, or between opportunity and traditional funding timelines.
Bridging is not a mortgage alternative. It's a specialist tool for specific situations where speed, flexibility, or unconventional circumstances make traditional lending impossible or impractical.
When does bridging make sense?
Bridging works when you need to move fast, when the property doesn't fit traditional lending criteria, or when you have a clear plan to repay within a short timeframe.
Auction purchases
You typically have 28 days to complete after the hammer falls. No mortgage can move that fast.
Chain breaks
Your sale falls through but you need to complete your purchase. A bridge keeps the deal alive.
Refurbishment
Buy a property below market value, refurbish it, then refinance or sell at the higher value.
Unmortgageable property
Properties with no kitchen, no bathroom, structural issues, or short leases — bridging lenders can work with these.
Land purchases
Buying land with or without planning permission — most banks won't touch it, but bridging lenders will.
Business opportunities
Capital raising against property you already own to fund a business deal or investment opportunity.
How does interest work?
Bridging interest is quoted as a monthly rate — typically between 0.40% and 1.5% per month. This is different from mortgages which quote annual rates. There are two ways interest can be structured:
Rolled Up (most common)
No monthly payments. Interest accrues each month and is added to the loan balance. Everything — capital plus interest — is repaid in one lump sum at the end. This preserves your cash flow during the project.
Interest Serviced
You pay the interest monthly, like a mortgage. The rate is usually lower, but you need to prove you can afford the monthly payments. Less common in commercial bridging.
Most of the deals we arrange use rolled-up interest. It's the standard approach for property investment and development bridging — the whole point is that you don't make monthly payments, so your cash is free to work on the project.
What are the fees?
Beyond the interest rate, there are typically three other costs:
Arrangement Fee (typically 2%)
Charged by the lender for setting up the loan. Usually deducted from the advance on day one, so on a £500k loan you'd receive £490k.
Exit Fee (typically 1%)
Charged when you repay the loan. Not all lenders charge this — some roll it into a higher arrangement fee instead.
Legal & Valuation
The lender instructs a solicitor and a valuer — you pay for both. Legal costs typically £2,500–£10,000 depending on complexity. Valuation £1,500–£5,000 depending on property value.
How much can I borrow?
Bridging lenders use Loan-to-Value (LTV) — the loan amount as a percentage of the property value. Most lenders will go up to 70–75% LTV, meaning you need to put in at least 25–30% of the property value as a deposit or equity.
Some lenders will go higher — up to 80% or even 100% in some cases — but this usually requires additional security (another property) or a particularly strong deal with a clear exit.
The lower your LTV, the better your rate. A 50% LTV deal will get significantly better terms than a 75% LTV deal because the lender has more security.
What rate will I get?
Your rate depends on several factors:
- LTV — lower LTV = lower rate
- Property type — standard residential investment gets better rates than land or unusual assets
- Exit strategy — a clear, proven exit (like a sale already agreed) improves your rate
- Borrower profile — experience, credit history, and financial standing all factor in
- Deal complexity — straightforward deals get better rates than complicated ones
As a rough guide: a straightforward first-time bridging deal at 65% LTV on a standard commercial property might achieve 0.65–0.85% per month. More complex deals or higher LTVs can be 1%+ per month.
Use our calculator to model the total cost for your specific scenario.
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