How bridging loans work

A bridging loan works as short-term finance secured against property. You borrow against the value of a property, pay interest by the month rather than over decades, then repay the whole loan in a single lump when you sell, refinance, or release other funds. That repayment plan is called the exit, and no lender will proceed without one.

The product exists for timing. A normal mortgage is built to run for 25 years. A bridge is built to cover a gap measured in weeks or months, so you can move on a deal before slower finance can catch up. Most bridging is interest-only and held for a short period, which is why it is priced and repaid so differently from a standard mortgage.

This page explains the mechanics in plain terms. It is information, not advice. For the full product, costs and how to get indicative terms, see our bridging loans page.

The mechanics, step by step

A bridging loan follows a simple shape. Understand these five pieces and you understand the product.

1. Security. The loan is secured against property, usually a first legal charge. That property can be the one you are buying, one you already own, or both.
2. Loan size and LTV. Lenders size the loan as a percentage of the property value, the loan-to-value or LTV. Most bridging caps around 75% LTV. A £750,000 loan on a £1m property is 75% LTV.
3. Interest. Bridging interest is quoted per month, not per year, because you hold the money for months. For most deals, indicative monthly interest runs from 0.50% to 1.10%.
4. Term. Regulated bridging runs up to 12 months. Unregulated bridging runs up to 24 months. You can usually repay early once a short minimum period has passed.
5. Exit. The plan to repay. Sell the property, refinance onto a term mortgage, or release cash from an unrelated asset. The exit is the single most important part of the application.

Put together, the journey reads like this. You agree terms, a RICS valuer confirms the property value, the lender’s solicitor and yours run the legals, funds release on completion, and the loan is repaid in full when your exit lands.

How the interest works

This is the part people most often get wrong. Bridging interest is charged monthly because the loan is short-term. A rate of 1% per month is not the same as 1% per year. Held for three months, a 1% per month loan costs roughly 3% of the amount borrowed in interest.

Worked example. Borrow £500,000 at 0.85% per month and hold it for three months. The interest is about £12,750. That is the cost of the speed and flexibility, set against whatever the deal is worth to you.

There are three common ways the interest is handled, and the lender confirms which applies:

• Serviced monthly. You pay the interest each month, like a mortgage.
• Rolled up. Interest accrues and is added to the balance, then cleared in full at the end. Nothing leaves your pocket during the term.
• Retained. The lender holds the interest for the term back out of the advance on day one, so you draw down slightly less.

Rolled-up and retained interest matter when the property produces no income during the loan, such as a refurbishment. You are not asked to service a loan from a property that is not yet earning.

What it costs beyond the interest

Interest is only one line. Plan for the rest so there are no surprises:

• Arrangement fee. Usually 1% to 2% of the loan, often added to the advance.
• Valuation fee. Paid up front to a RICS valuer, indicatively £400 to £2,500 for standard property.
• Legal fees. Your own and the lender’s, typically £750 to £3,500 for standard cases.
• Exit fee. Some lenders charge 0% to 1% on redemption. Many waive it.

A broker fee may also apply, disclosed in writing before you commit. Every figure here is indicative. The lender confirms the real numbers on application once it has seen the property and your file.

How fast a bridge moves

Speed is the reason most people use bridging, so it is worth knowing what is realistic. Indicative terms typically arrive within 24 hours of a complete enquiry. Standard completion runs 7 to 14 working days. Clean cases can fast-track from 72 hours, where the title is simple and the valuer can attend quickly.

Two things slow a deal down: missing documents and valuation delays. Awkward title, planning conditions on the property, and a slow solicitor add time too. Getting your paperwork ready early protects your timeline more than anything else.

Why the exit decides everything

A bridging lender is lending on the strength of how you will repay, not just the property. If the exit is weak, the deal does not happen, however good the asset looks.

The common exits are a sale of the property, a refinance onto a longer-term mortgage, or the sale of a separate asset. If your exit is a refinance, the lender wants to see the term mortgage is realistic before it advances the bridge. If your exit is a sale, it wants evidence the property will sell within the term. Stress-test your exit before you apply. A bridge with no credible way out is a problem waiting at the end of the term.

Regulated versus unregulated, in one line

What secures the loan decides the category, not the lender. Regulated bridging is secured against a property that is, or will become, your own home or an immediate family member’s. It falls under FCA mortgage rules and is capped at 12 months. Unregulated bridging covers investment, commercial and business property, runs up to 24 months, and is usually quicker to arrange. On any regulated case, a qualified adviser handles the advice.

When a bridge is the right tool

A bridging loan fits when a mainstream mortgage cannot move fast enough or the property does not fit a standard box. Typical uses include buying at auction against a 28-day deadline, completing an onward purchase when your buyer drops out, refurbishing a property before refinancing it, raising cash against existing equity for a tax bill or probate, or buying a property a high-street lender will not touch in its current state.

It is the wrong tool if you want a loan to repay slowly over many years. That is a term mortgage, a different product entirely.

Frequently asked questions

Talk it through before you commit

If you are weighing whether a bridge fits your situation, the fastest way to get clarity is a short call. Tell us the property, the loan size, the purpose and your exit, and a broker will frame what is realistic and come back with indicative terms inside 24 hours. There is no fee to find out and no impact on your credit file when you ask for a quote.

For the full product detail, costs and lender comparison, read our bridging loans page. This guide is information, not regulated advice. A qualified adviser confirms the regulatory position of your specific case on the call.