What is a Bridging Loan?

Key Takeaways

• Bridging loans are short-term financial solutions designed to “bridge” funding gaps in property transactions
• Typically lasting up to 12 months, they offer rapid financial flexibility
• Ideal for property purchases, renovations, auction buying, and buying before selling
• Loan eligibility depends primarily on loan-to-value ratio, not credit score or income
• Interest rates range from 0.68% to 1% per month, with no monthly repayments required

What Exactly is a Bridging Loan?

A bridging loan is a short-term financing option specifically designed to provide immediate funds when you need to move quickly in the property market.

Unlike traditional mortgages, these loans offer unprecedented speed and flexibility, allowing you to:

• Purchase a new property before selling your existing home
• Buy properties traditional lenders consider “unmortgageable”
• Secure auction purchases with strict completion deadlines
• Fund urgent property-related expenses

How Bridging Loans Work

The Bridging Loan Process

Here’s a quick outline of the bridging loan process:

1. Initial Assessment: Evaluate your financial requirements and potential exit strategy
2. Loan Application: Work with a bridging finance broker to streamline the process
3. Property Valuation: Lenders assess the security for your loan
4. Funds Release: Receive financing within days, typically 72 hours to 3 weeks
5. Repayment: Clear the loan through your predetermined exit strategy

Eligibility & Understanding Loan-to-Value Ratios

Bridging loan eligibility differs significantly from traditional lending. Key considerations include:

• Maximum loan-to-value ratio: Typically around 80%
• Less emphasis on credit scores
• Focus on robust exit strategy
• Property value as primary security

To see if you’re eligible, use our bridging finance calculator:

Costs and Fees: What to Expect

Interest Rates

• Monthly interest: 0.68% – 1% of gross loan value
• Interest often rolled into total loan amount
• No monthly repayments required

Additional Costs

• Lender facility fee: 1.5-2% of loan value
• Property valuation: Approximately £950
• Legal fees: Around £1,000 for a £250,000 property
• Potential administration fees

Note: you’ll typically stop paying bridging loan interest as soon as you repay, which is why it’s good to use a calculator to get a true illustration of what your costs will look like, month by month.

Common Use Cases for Bridging Loans

1. Buy Before Sell Scenarios

When your dream property won’t wait, bridging finance enables immediate purchase without selling your current home.

2. Auction Property Purchases

Meet strict 28-day completion deadlines for auction properties with rapid funding.

3. Renovation Projects

Purchase and transform unmortgageable properties, then refinance or sell.

4. Investment Strategies

“Bridge to Let” or property flipping becomes seamless with flexible financing.

5. Personal Financial Challenges

You can even cover urgent expenses like care fees while awaiting fund release from property sales.

Risks and Considerations

Potential Drawbacks

• Higher interest rates compared to traditional mortgages
• Risk of property repossession if exit strategy fails
• Requires careful financial planning

Mitigating Risks

• Work with experienced bridging finance brokers (we’re free of charge!)
• Develop a clear, realistic exit strategy
• Understand the full cost implications