A bridging loan is a short-term loan secured against property, normally for one to twenty-four months, used when a purchase or a refinance cannot wait for a conventional mortgage. It is repaid in one lump from a defined event — usually a sale or a refinance — rather than through monthly capital repayments over decades.
That is the whole idea. Everything else is detail, and the detail is where deals are won or lost.
Why bridging exists at all
Mainstream mortgage lending is built around two assumptions: that the property is in a lettable, liveable condition today, and that the borrower has provable income to service the debt for the next twenty-five years. Both assumptions are reasonable most of the time. Both of them break constantly in property investment.
A house with no kitchen and no bathroom is not mortgageable. A commercial unit with no tenant produces no income to underwrite. A developer who needs to complete on a site in eleven days cannot wait eight weeks for an underwriter. A homeowner whose buyer has just pulled out three days before exchange has an offer accepted on a property that the seller is about to remarket.
None of those situations is unusual. None of them is fundable by a high-street lender. All of them are fundable by a bridging lender, because bridging underwrites two things a term lender does not put first: the security and the exit.
How lenders actually assess a bridge
A term mortgage lender asks "can this borrower afford this loan for twenty-five years?" A bridging lender asks three different questions.
What is the property worth, and how easily could it be sold? The security is the lender's protection. Condition matters less than saleability. A structurally sound but unmodernised terrace in a town with active demand is better security than a beautifully finished property in a location nobody buys in.
How will the loan be repaid? This is the exit, and it is underwritten as carefully as the property. "I'll sell it" is not an exit strategy. "The agent has appraised it at £240,000 based on these three comparables, and similar properties in the street sold within six weeks" is an exit strategy. So is a decision in principle from a buy-to-let lender.
Who is the borrower, and can they deliver the plan? Experience matters, particularly where works are involved. Credit history matters, but far less than it does on a residential mortgage — a bridging lender can live with a historic default in a way a high-street lender cannot, because the property carries the risk.
Affordability, in the sense a residential borrower would recognise, often does not feature at all. On a rolled-up bridge there are no monthly payments to afford.
Net loan, gross loan, and the number that trips people up
This is the single most misunderstood part of bridging, and it is worth getting straight before you look at any quote.
The net loan is the cash that reaches your solicitor. The gross loan is the total debt the lender registers against the property. The difference is the fees that are added to the loan rather than paid upfront — typically the lender's arrangement fee and the broker fee — plus, on a retained deal, the interest for the whole term.
Lenders set their maximum loan to value against the gross figure. So when a lender advertises 75% LTV on a £500,000 property, they are not offering you £375,000 in cash. They are offering a gross facility of £375,000, from which the fees come out first.
A worked example. Suppose you need £300,000 in cash against a £500,000 property, with a 2% lender arrangement fee and a 1.5% broker fee:
| | | |---|---| | Net loan (cash to you) | £300,000 | | Lender arrangement fee (2%) | £6,218 | | Broker fee (1.5%) | £4,663 | | Gross loan | £310,881 | | Gross LTV at day one | 62.2% |
Because interest on a rolled-up bridge compounds onto that gross loan, the amount owed at the end is higher again — and most lenders measure the LTV of a rolled-up facility against what will be owed at redemption, not what was drawn on day one. At 0.85% a month over twelve months, that £310,881 becomes £344,116, or 68.8% of the property's value.
That is the figure a lender is really looking at. It is also why increasing the cash you need by a modest amount can tip the whole deal into a higher rate band, because the pricing tiers are based on gross LTV.
The three ways to pay interest
Bridging is quoted as a monthly rate, and there are three ways to settle it.
Rolled up. Interest is added to the balance each month and compounds. You pay nothing until the loan is redeemed. It is the most common structure, because most bridging borrowers do not have income from the property during the term.
Retained. The lender calculates the interest for the whole term and holds it back from the advance at the outset. You make no monthly payments, but you borrow more to cover it, so the gross loan and the LTV are both higher. If you repay early, unused interest is usually refunded.
Serviced. You pay the interest monthly and repay the capital at the end. It is the cheapest of the three, because nothing compounds — but the lender will want to see that you can genuinely afford the payments.
On a typical twelve-month facility the gap between the cheapest and most expensive of these is thousands of pounds. It is covered in detail in our guide to rolled-up, retained and serviced interest.
What a bridge costs
Four separate costs, and quotes that only mention the first one should be treated with suspicion.
- Interest, quoted monthly rather than annually. Priced in LTV bands, so the rate steps up as the gross LTV rises.
- The lender's arrangement fee, commonly around 2% of the gross loan, usually added to the loan.
- The broker fee, ours is 1.5% of the loan, disclosed in writing before you commit.
- Third-party costs — valuation and legal fees, paid to the valuer and the solicitors.
Some facilities also carry an exit fee, charged on redemption. It is not universal, and it is worth asking about specifically because it does not appear in a headline rate.
Our bridging loan calculator includes all of these, which is the only way to compare two quotes honestly.
Regulated and unregulated bridging
This distinction matters more than most borrowers realise.
Bridging secured against a property you live in, or intend to live in, is generally a regulated mortgage contract. The lender must assess suitability and affordability, the sales process is more involved, and you have access to the Financial Ombudsman Service. Fewer lenders hold the permissions to do it.
Bridging secured against an investment property, a commercial building or land is generally unregulated. Lenders have more flexibility on structure, term and loan to value, and the process is faster — but the consumer protections attached to regulated lending do not apply.
Neither is better. They are different regimes for different situations, and you should know which one your case sits in before you sign anything.
When bridging is the wrong answer
An honest broker will tell you when not to use a bridge.
When there is no clear exit. If the plan is "something will turn up", a bridge converts a problem into an expensive problem with a deadline attached.
When a term lender can move in time. If a buy-to-let mortgage can complete in eight weeks and you have twelve, use the buy-to-let mortgage. It will cost a fraction as much.
When the deal only works if everything goes right. Build in a contingency on cost and on time. A twelve-month facility on a six-month project gives you room; a six-month facility on a six-month project gives you none.
When the numbers are marginal. If the projected profit is thin, the cost of bridging can eliminate it entirely. Run the figures with the total cost of borrowing included, not just the interest.
How to make a bridging case move quickly
Cases stall for mundane reasons. Missing identification. A schedule of works written on the back of an envelope. An exit strategy nobody has evidenced. A valuer who cannot get access because nobody has the keys.
The single most useful thing you can do is have the file complete before it goes to a lender:
- Photo ID and proof of address for every borrower
- Details of the property: address, tenure, condition, current use
- Evidence of your exit — an agent's appraisal, or a lender's decision in principle
- Proof of the deposit or equity going in, and where it came from
- A costed schedule of works if anything is being refurbished
- Company documents and director details if you are borrowing through an SPV
That list is most of what a lender needs to underwrite. Assembling it in advance is the difference between a case that completes and a case that grinds.
The broker's role
We do not lend. We take your deal, work out whether it is fundable, build the file a lender needs, and place it with the lenders whose criteria genuinely fit — then manage the valuation and the solicitors through to completion.
That last part matters more than it sounds. Most declines in specialist finance are about presentation rather than substance: a lender sees an incomplete file with an unevidenced exit and declines it in minutes, without ever finding out that the deal was sound.
If you have a deal you want tested, send us the outline. There is no charge for a review and no credit check involved in giving you an answer.