Bridging Loan Guide | Everything You Need to Know About Bridging Finance & Equity

Are you considering a bridging loan but unsure how it works, when to use one, or what the risks and benefits might be? Bridging finance is a short-term funding solution designed to “bridge the gap” between buying and selling, or to unlock equity quickly when timing is critical.

Whether you’re moving home, purchasing an investment property, funding a renovation, or seizing a time-sensitive opportunity, a bridging loan can provide fast access to funds when traditional mortgage finance isn’t suitable or available.

In this guide, we’ll cover everything you need to know about bridging finance, from how it works and the different types of loans available to eligibility criteria, costs, and common uses. By the end, you’ll have a clear picture of whether bridging finance could be the right option for you.

Bridging Loan Guide

What is a Bridging Loan?

A bridging loan is a short-term loan designed to ‘bridge’ a financial gap — typically between the sale of one property and the purchase of another. It’s often used when fast access to capital is required and conventional mortgages are too slow or inflexible.

FeatureDescription
Loan TermUsually 1 to 18 months (can be up to 36 months in some cases)
Loan PurposeTo bridge the gap between two transactions or fund short-term needs
Secured AgainstProperty or land (can be residential, commercial, or mixed-use)
Speed of AccessFunds can often be released within 5-10 working days
Repayment MethodRepaid in full at the end of the term, often via sale or refinance

When is the Right Time to Use a Bridging Loan?

Bridging loans are NOT for long-term borrowing, but they can be extremely effective in certain situations.

ScenarioWhy a Bridging Loan Works
Buying before sellingSecure your new home before your current property sells
Auction purchasesQuick funding needed within tight deadlines
Property chain breaksPrevent a chain collapse from derailing your move
Property renovationsFinance refurbishments before refinancing onto a mortgage
Land purchases or developmentBuy land quickly or fund a development project
Urgent business or tax liabilitiesRelease capital quickly using property as security

Common Myths About Bridging Loans – Busted!

MythTruth
“Bridging loans are only for property developers”Not true — they’re used by homeowners, landlords, and businesses too
“They’re only for people with bad credit”Wrong — many clients have excellent credit and just need speed
“Bridging loans are always expensive”Rates have become far more competitive — especially for low-risk cases
“It’s hard to qualify for a bridging loan”If you have an exit plan and security, approval can be straightforward
“Bridging lenders aren’t regulated”Many are regulated by the FCA; unregulated options also exist for business deals

Pros and Cons of Bridging Finance

ProsCons
Fast access to funds (often within days)Higher interest rates than traditional mortgages
Flexible lending criteriaFees can be significant (arrangement, legal, valuation, etc.)
Can secure deals others can’tMust have a clear exit strategy (sale, refinance, etc.)
Useful for complex property or income situationsIf exit fails, you may need to refinance or sell property

Types of Bridging Loans

TypeDescription
Open Bridging LoanNo fixed repayment date; more flexibility but may be seen as riskier
Closed Bridging LoanFixed repayment date (e.g., when contracts are exchanged) — usually cheaper
First ChargeLender is first in line if property is repossessed
Second ChargeLender ranks behind the main mortgage provider
Regulated BridgingFCA-regulated; for properties you or family intend to live in
Unregulated BridgingNot FCA-regulated; for business or investment purposes

What Lenders Look For

To approve a bridging loan, lenders typically assess:

  • Value of the security (property or land)

  • Loan-to-Value (LTV) – usually up to 75%

  • Your exit strategy (e.g. sale or remortgage plan)

  • Creditworthiness (not always critical)

  • Property type and location

  • Borrowing amount and term needed

Example Bridging Loan Calculation

ItemAmount
Property Value£400,000
Loan Required (70% LTV)£280,000
Interest Rate (monthly)0.9%
Loan Term6 months
Interest£15,120
Arrangement Fee (2%)£5,600
Valuation/Legal Fees~£1,500
Total Repayment~£302,220

(Interest may be rolled up or deducted from the loan amount upfront)

Exit Strategies: How You Pay It Back

Bridging loans must be repaid in full at the end of the term, so having a clear exit strategy is crucial.

Exit StrategyExplanation
Sale of current or purchased propertyCommon option when selling one to fund another
Refinance to longer-term mortgageAfter refurbishments or improved financial position
Inheritance or investment maturingIf funds are known to be arriving in a set time frame
Business incomeIf borrowing is for short-term business use

Regulated vs Unregulated Bridging Loans

FeatureRegulated Bridging LoanUnregulated Bridging Loan
FCA ProtectionYesNo
Use CasePurchase/refinance of residential homes (your home)Buy-to-let, development, land, business use
Who Can Use ItIndividuals buying or refinancing homesCompanies, investors, developers
Application ProcessMore documentation & suitability checksOften faster and more flexible

Should You Get Advice?

Absolutely. Bridging loans can be an excellent tool, but they’re not suitable for every borrower. A qualified adviser can:

  • Help determine if bridging is right for you

  • Explain costs clearly

  • Help prepare your exit plan

  • Access lenders not available directly to consumers

  • Speed up approval by handling paperwork

Bridging Loan FAQ

Q: How quickly can I get a bridging loan?
A: Often within 5 to 10 working days (some as fast as 3 days in urgent cases).

Q: What happens if I can’t repay on time?
A: You may need to refinance, extend the loan, or sell the property. Additional interest or fees may apply.

Q: Can I get a bridging loan with bad credit?
A: Possibly — lenders look at the overall deal and security, not just credit.

Q: Are monthly repayments required?
A: Not always. Many loans “roll-up” the interest, meaning you pay nothing monthly and repay everything at the end.

Bridging loans are a powerful financial tool when used in the right circumstances, especially when time is of the essence. However, they come with risks and costs, so it’s essential to seek advice from a mortgage broker who understands the market.

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