Glossary
Bridging Finance
Without the Jargon.
Every term you need to understand, explained in plain English. No waffle, no unnecessary complexity — just clear definitions from people who arrange bridging finance every day.
How the terms fit together
Illustrative example. Invented figures to show how the terms fit together. Not a real deal and not an offer of terms.
A company wants a £2.5m bridge to refinance a semi-commercial building. It already holds a Red Book valuation for another lender, so it asks the valuer about readdressing it. The new lender’s panel valuer reports a vacant possession value below the investment value, so the loan is sized on the lower figure. Extra security is a second charge over another investment property, which needs first-charge consent, unless its existing lender offers a further advance instead. Before signing, the directors check the ERC and the minimum interest period in writing.
Arrangement Fee
A fee charged by the lender to set up the bridging facility, typically 1–2% of the loan amount. Paid on completion, sometimes deducted from the advance.
Asset-Based Lending
Lending decisions based primarily on the value and quality of the property being offered as security, rather than the borrower's income or credit history. Most bridging finance is asset-based.
Bridging Loan
A short-term, property-secured loan designed to "bridge the gap" between a financial need and a longer-term solution. Repaid through sale, refinance, or other capital. Terms are most commonly 12 to 24 months; some lenders go to 36 months.
Broker Fee
The fee charged by a bridging finance broker for arranging the loan. Ours is generally 1% of the gross loan, paid on completion.
Buy-to-Let (BTL)
A property purchased specifically to be rented out to tenants. BTL properties are commonly used as security for bridging loans and as a refinance exit strategy.
Charge (First / Second)
A legal claim registered against a property as security for a loan. A first charge has priority over all other claims. A second charge sits behind the first and is repaid after the first charge lender.
Cross-Collateralisation
Using more than one property as security for a single loan. This can increase the amount available to borrow or secure a lower interest rate by reducing the lender's risk.
Day-One Advance
The net amount of money released to the borrower on completion day, after deduction of fees and any retained interest.
Default Interest
A higher rate of interest applied if the borrower fails to repay the loan by the agreed term end date. Typically significantly higher than the standard rate.
Drawdown
The release of loan funds. In bridging, this usually happens as a single lump sum on completion. In development finance, funds are drawn in stages (tranches).
Equity
The difference between a property's market value and any outstanding debt secured against it. Equity can be used as a deposit or as security for additional borrowing.
Exit Fee
A fee charged by some lenders when the loan is repaid (also called a redemption fee). Typically 0-1% of the loan amount, and many lenders charge none. See also ERC and Minimum Interest Period.
Exit Strategy
The borrower's plan for repaying the bridging loan. Common exits include sale of the property, refinance onto a longer-term product, or repayment from other capital. Every bridging loan requires a credible exit.
Facility Letter
The formal loan offer document from the lender, detailing the loan amount, interest rate, term, fees, conditions, and security requirements.
First Charge
The primary legal claim against a property. The first charge lender has priority in the event of a sale or default. First charge bridging loans typically offer lower rates than second charge.
Fixed Rate
An interest rate that stays the same throughout the loan term. Most bridging loans are fixed rate.
Gazumping
When a seller accepts a higher offer from another buyer after already accepting yours. Bridging finance can help prevent this by enabling faster completion.
Gross Loan
The total loan amount before any deductions. The net loan (day-one advance) will be lower after arrangement fees and any retained interest are deducted.
Intercreditor Agreement
A legal agreement between a first charge lender and a second charge (or mezzanine) lender, setting out the priority of their respective claims and how proceeds are distributed.
Interest (Rolled Up / Retained / Serviced)
The three ways bridging interest can be structured. Rolled up: added to the loan and repaid at the end. Retained: deducted from the advance upfront. Serviced: paid monthly like a mortgage.
Joint Venture (JV)
A partnership between two or more parties to undertake a property project, typically combining capital, expertise, or land. JV structures can be funded with bridging finance.
Key Undertakings
Conditions in a facility letter that the borrower must fulfil — either before drawdown (conditions precedent) or during the loan term (ongoing covenants).
Legal Charge
The formal registration of a lender's security interest against a property at the Land Registry. Gives the lender the right to take possession if the borrower defaults.
Loan-to-GDV
The loan amount expressed as a percentage of the property's Gross Development Value — what it will be worth after works are completed. Used in development and heavy refurbishment lending.
Loan-to-Value (LTV)
The loan amount expressed as a percentage of the property's value. A £750,000 loan on a £1m property is 75% LTV. Lower LTV generally means better rates.
Mezzanine Finance
A layer of funding that sits between senior debt (first charge) and the borrower's equity. Allows developers to borrow up to 85-90% of costs. Higher rates but can unlock otherwise unviable projects.
Monthly Interest Rate
Bridging loan interest is quoted as a monthly percentage rather than annually. The average published rate across 42 lenders, as at 25 October 2026, is 0.76% a month. To compare with annual products, multiply by 12.
Offer Letter
See Facility Letter. The formal document from the lender setting out all terms and conditions of the loan.
Official Copies (OCEs)
HM Land Registry's official copies of a title's register and title plan. They show who owns the land, what charges are registered and, on the plan, the extent of the title.
Open Bridge
A bridging loan where the borrower does not have a fixed repayment date or confirmed exit. Harder to obtain and more expensive than a closed bridge with a defined exit.
Procuration Fee
A fee paid by the lender to the broker for introducing the business. This is separate from and in addition to the broker fee paid by the borrower.
Redemption
The repayment and closure of a bridging loan. On redemption, the legal charge is removed from the property.
Regulated Bridging
A bridging loan to an individual or trustee, secured against a property where at least 40% is used, or will be used, as a home by the borrower or a close family member. Regulated by the FCA. bridging.fund specialises in unregulated bridging only.
Retained Interest
Interest deducted from the loan advance upfront and held by the lender. If the loan is repaid early, unused retained interest is typically refunded.
Rolled Up Interest
Interest added to the loan balance during the term and repaid as a lump sum at exit. Interest is often rolled up, so there are often no monthly payments, though some lenders let you pay monthly.
Second Charge
A loan secured against a property that already has a first charge mortgage or loan. The second charge lender is repaid after the first charge lender. Rates are higher but it avoids disturbing the existing facility.
Secured Lending
Any loan where property or another asset is offered as collateral. All bridging loans are secured against property.
Senior Debt
The primary (first charge) loan on a property. In a capital stack, senior debt has the highest priority and lowest risk, so attracts the lowest rate.
Serviced Interest
Interest paid monthly by the borrower during the loan term, like a traditional mortgage. Less common in bridging than rolled up interest.
Short-Term Finance
Any lending facility with a short term, measured in months rather than years. Bridging loans are the most common form of short-term property finance.
Term
The agreed duration of the bridging loan, most commonly 12 to 24 months; some lenders go to 36 months. Shorter terms generally mean lower total cost if the exit strategy is delivered on time.
Title Insurance
Insurance that protects the lender against defects in the property's legal title. Can speed up completion by removing the need for lengthy title investigations.
Total Cost of Borrowing
The all-in cost of a bridging loan including interest, arrangement fee, exit fee, valuation, legal fees, and broker fee. Always compare total cost, not just the headline rate.
Tranche
A portion of a loan drawn down separately. In development finance, funds are released in tranches as construction milestones are met.
Underwriting
The lender's process of assessing a loan application — evaluating the property, borrower, exit strategy, and risk before issuing a formal offer.
Unregulated Bridging
Bridging loans secured against property that the borrower does not live in or intend to live in — commercial, investment, land, or development sites. Not subject to FCA regulation, allowing greater speed and flexibility.
Variable Rate
An interest rate that can change during the loan term, usually linked to a base rate. Less common in bridging than fixed rates.
Zero Exit Fee
A bridging loan with no fee charged on redemption. Many lenders active in the market offer zero exit fee products, reducing the total cost of borrowing.
Last reviewed: 18 October 2026
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