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 typically completes in 5–7 working 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. Terms are most commonly 12 to 24 months; some lenders go to 36 months. If you've come here asking "bridging loan — how does it work?" this page is the answer.
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 20 business days to complete after the hammer falls. No mortgage can move that fast.
Investor chain breaks
The sale of an investment property falls through but you need to complete your next acquisition. A bridge keeps the deal alive.
Refurbishment
Buy a property below market value, refurbish it, then refinance or sell at the higher value. Here is what a lender will lend on a BMV purchase.
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 up to 1.5% a month. Bridging rates start from 0.50% a month (first charge, under 50% loan-to-value, straightforward cases). This is different from mortgages which quote annual rates. There are two ways interest can be structured:
Rolled Up
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. Lenders will want to see that you can afford the monthly payments.
Interest is often rolled up, so there are often no monthly payments, though some lenders let you pay monthly. Where it is rolled up, 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 1–2%)
Charged by the lender for setting up the loan. Usually deducted from the advance on day one, so at 2% on a £500k loan you'd receive £490k. See gross vs net loan.
Exit Fee (0–1%)
Charged when you repay the loan. Many lenders charge none; 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 about £1,500–£2,000 plus VAT for each side on a loan of about £200k (more on larger or complex loans), depending on complexity. Valuation nil to about £100 for a desktop valuation and up to about £2,000 for a full one, plus VAT, on a loan of about £200k, depending on the property.
Our Fee (1%)
Generally 1% of the gross loan, paid on completion. You'll know the figure before you commit.
How much can I borrow?
Bridging lenders use Loan-to-Value (LTV) — the loan amount as a percentage of the property value. Lenders typically go up to 75% LTV, meaning you need to put in at least 25% of the property value as a deposit or equity.
A few lenders will go higher with additional security, such as a charge over another property you own.
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 — how much you borrow against the property’s value
- 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% a month. More complex deals or higher LTVs can be 1%+ a month.
Use our calculator to model the total cost for your specific scenario.
What happens step by step
- Enquiry. You tell us the property, the price, how much you need and your exit. A call, email or WhatsApp is enough; there is no formal application at this stage.
- Terms. We take the deal to suitable lenders and come back with indicative terms: loan amount, rate, fees, term and any conditions. If you are happy, you sign the terms and the lender instructs its valuer and solicitor.
- Valuation and legal. The valuer inspects while the lender’s solicitor does title checks and searches. You need your own solicitor to act for you. This is usually the longest stage, and complex titles or structures take longer.
- Completion. The lender issues the facility letter, you sign, and the funds go to your solicitor on the agreed date. The arrangement fee and legal costs come off, and the balance completes your transaction.
- Term and exit. With rolled-up interest there is nothing to pay during the term. When you sell or refinance, your solicitor repays the loan plus the rolled-up interest and any exit fee, and the lender’s charge is removed.
For realistic timings at each stage, see how long a bridging loan takes, and for what to have ready, our pre-application checklist.
To see what we do at each stage, who you deal with and when our fee is due, read how we work with you.
Ready to discuss your deal?
Get in touch and we'll provide the right solution for your deal. If we can respond immediately we will, otherwise we'll call you back the same working day, often within a couple of hours.