How bridging loans work: rates and costs

What is a bridging loan?

A bridging loan is a short-term loan secured on property, normally for 1 to 24 months. Instead of monthly capital repayments, it's repaid in one go when you sell the property or refinance onto a long-term mortgage. That repayment route is called the exit, and it matters more to a bridging lender than almost anything else.

How does a bridging loan work?

1. Terms. You share the deal: the property, price, value, any works and your exit. The lender issues indicative terms, often within a day. Get instant terms.
2. Valuation. A surveyor values the property as it stands, and after works if works are planned.
3. Legal work. Solicitors check the title and the security. On simpler cases one firm can act for both sides, which saves time.
4. Completion. The loan is drawn on day one. Works money, if any, is released in stages as works are done.
5. Exit. You sell or refinance, and the loan, interest and any exit fee are repaid in full.

Bridging loan rates and costs

These are indicative market ranges, not an offer. Rates are quoted monthly, not yearly: 0.85% a month is roughly 10.2% a year. The lowest rates go to lower loan-to-value, first-charge loans on standard residential property with a clear exit. Heavier works, unusual property, second charges and higher LTVs cost more.

Retained, rolled or serviced interest

• Retained: the lender holds back the interest for the whole term from the loan on day one. Nothing to pay monthly, but you receive less cash up front. The most common option.
• Rolled up: interest is added to the balance each month and repaid at the end.
• Serviced: you pay the interest monthly, like an interest-only mortgage. The gross loan stays smaller, so the net advance is bigger.

The bridging loan calculator shows the true cost and the net cash on day one under each option, and the retained vs rolled vs serviced comparison shows when a lower retained rate ends up costing more.

How much can you borrow?

Typically up to 70–75% of the property's value, including fees and retained interest. Two things can stretch that:

• Buying below market value. Some lenders advance the lower of 90% of the price or 70–75% of the value, so a good discount can mean little cash in. See below market value bridging.
• Refurbishment. Lenders can fund up to 100% of the works on top of the purchase advance, case by case. See refurbishment bridging.

How fast does a bridging loan complete?

Straightforward cases often complete in two to four weeks, and faster when the valuation and legal work are ready to go. See fast bridging loans for what speeds a case up and what slows it down.

When investors use bridging

• Auction purchases with a 28-day completion deadline. See auction finance.
• Unmortgageable property: no kitchen or bathroom, a short lease, or structural work needed.
• Refurbishment and conversions: buy, improve, then refinance at the higher value. See bridge-to-let.
• Chain breaks: buying before a sale completes.
• Capital raising: releasing equity quickly for another purchase.

What lenders look at

• The exit: is a sale or refinance realistic within the term?
• The security: value, condition, location and saleability.
• Your experience, especially for heavier works.
• The borrower: individual, limited company or SPV, with directors' guarantees.

Bridging on property you or your family will live in is regulated and needs an FCA-authorised adviser. Investment bridging, on property you let or sell, usually isn't regulated.

Frequently asked questions