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A bridging loan is a short-term secured loan that helps bridge a temporary funding gap, for example if you're buying a house before selling your current home or buying at auction. Bridging loans are usually repaid within 12 months by selling a property or remortgaging. We explain how they work, who can get one, how to apply, the costs and the risks.
Bridging loans can be a useful short-term solution in the right circumstances, but they work differently from a standard mortgage. Here’s a quick overview before we explain how bridging loans work, their costs and when they may be suitable.
KEY INFORMATION
Jump to: How bridging loans work | How to get a bridging loan | How much bridging loans cost | Bridging loan calculator | Alternatives to bridging loans | FAQs
Bridging loans can be used in a range of situations where you need short-term finance quickly. Common examples include:
Not sure if a bridging loan is right for you? Get specialist advice today.
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
Bridging loans provide short-term finance secured against property. Before the loan is agreed, you’ll need to show the lender how you plan to repay it – this is known as your exit strategy. The loan is then repaid once your exit strategy is completed, usually by selling a property or remortgaging.
In simple terms, bridging loans work as follows:
Here’s an example of how a bridging loan works if you own your property outright. The same principle applies if you already have a mortgage, although the amount you can borrow will depend on the equity available.
If you’re considering a bridging loan, read our step-by-step guide below on how to get a bridging loan, including the eligibility requirements and application process.
You can typically borrow between £50,000 and £10 million with a bridging loan, although this varies between lenders. The amount you can borrow depends mainly on the value of your property, the equity available and your exit strategy.
You may be able to get a bridging loan if you have enough equity in a property and a clear plan for repaying the loan. Whether you’ll qualify depends on your circumstances and the lender’s criteria.
You may be able to get a bridging loan if you’re:
When deciding whether to lend, providers will usually consider:
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
Here’s the process of how to apply for and arrange a bridging loan:
The bridging loan process starts by finding a specialist bridging loan broker and making an enquiry. They’ll run through why you want a bridging loan, how much you want to borrow and how you’ll repay it. Your exit plan may be selling a property or, if you’re buying an unmortgageable property, renovating it before taking out a residential or Buy to Let mortgage.
Bridging loans are specialist finance, so choosing the right broker can make a big difference. A good broker will compare lenders, explain the costs and help you decide whether a bridging loan is the most suitable option for your circumstances.
When comparing brokers, consider:
Once your bridging loan broker understands your needs, they’ll speak to lenders on your behalf. Unlike with standard mortgages, bridging loan rates and terms may sometimes be negotiable, so a specialist broker may be able to secure a more suitable deal.
Your broker will then explain your options. Once you’ve chosen a lender, they’ll complete the application with detailed information about the property and your financial circumstances.
The lender will assess your application against their lending criteria and arrange a valuation of the property being used as security.
While lending criteria varies, they’ll typically consider:
You’ll also normally need to provide documents to support your application (see more information below).
Once these checks have been completed, the lender may make a conditional offer setting out the loan amount, interest rate, fees and terms.
Bridging loans require several legal steps and it’s important to use a solicitor or conveyancer experienced with dealing with bridging finance. Your broker will explain what’s involved and help coordinate the process. Once legal checks are complete and all conditions are met, the lender will formally approve the loan.
Once everything has been approved, the lender releases the funds (sometimes called drawdown).
Get a free, no obligation quote and instant decision from specialist brokers Fluent Money.
Bridging loans usually take around 5 to 21 days to be approved, although some can be arranged more quickly depending on your circumstances and the lender.
Factors that could affect timelines include:
Before the 2008 financial crisis, some high street banks offered bridging loans. Today, they’re more commonly provided by specialist lenders, although some regional building societies also offer bridging finance.
Many borrowers use a specialist broker because they can compare lenders, explain the costs and help you decide whether a bridging loan is the most suitable option for your circumstances.
If a bridging loan isn’t the right solution, a good broker should also explain any suitable alternatives.
The exact documents required vary between lenders, but you’ll usually be asked to provide:
You may need to supply additional documents depending on your circumstances but your bridging loan broker will explain this to you.
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
The total cost of a bridging loan includes interest and a range of fees, so it’s important to compare the overall cost rather than the interest rate alone.
Alongside the interest rate, there are other bridging loan fees you may have to pay. These include:
Want a personalised estimate? Use our free Bridging Loan Calculator to estimate the interest, fees and total cost based on your own circumstances.
The examples below show how much a bridging loan could cost in different situations. They’re for illustration only – your costs will depend on the lender, interest rate, fees and how long you need the loan.
Bridging loan cost example 1
Say you currently own a £400,000 property with an outstanding mortgage of £100,000. You want to downsize to a £250,000 property but your current house sale is delayed. You want to take out a bridging loan for £250,000 for 3 months so that you can go ahead with the purchase of your new house. You’ll then pay back the bridging loan when the sale of your current home completes. Here’s how much that could cost:
| Bridging Loan Borrowed | £250,000 |
| Monthly Interest Rate | 0.75% |
| Interest Amount | £5,781 (Assumes full term of 3-months, calculated daily) |
| Arrangement fee | £5,000 (Added to loan) |
| Valuation Fee (Inc. VAT) | £348 (Some lenders provide valuations using an Automated Valuation Method – AVM at no charge) |
| Telegraphic Transfer Fee | £35 (Added to loan) |
| Administration Fee | £145 (Added to loan) |
| Estimated legal costs | £900 |
| Redemption Administration Fee | £40 |
| Total cost | £262,248 |
Bridging loan cost example 2
Say you currently own a £600,000 property outright and want to take out a £400,000 bridging loan for 12 months so that you can downsize to a £400,000 property before selling your current home. How much might that cost?
| Bridging Loan Borrowed | £400,000 |
| Monthly Interest Rate | 0.7% |
| Interest Amount | £35,623 (Assumes full term of 12-months, calculated daily) |
| Arrangement fee | £8,000 (Added to loan) |
| Valuation Fee (Inc. VAT) | £522 (Some lenders provide valuations using an Automated Valuation Method – AVM at no charge) |
| Telegraphic Transfer Fee | £35 (Added to loan) |
| Administration Fee | £145 (Added to loan) |
| Estimated legal costs | £900 |
| Redemption Administration Fee | £40 |
| Total cost | £445,264 |
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
Use this bridging loan calculator to get a detailed estimate of interest, charges and other costs of your bridging finance and get a quote instantly.
The amount you can borrow depends on factors including:
Not sure what your loan-to-value is? Try our Loan to Value calculator.
A bridging loan could be a good option if you need fast, short-term finance and have a clear plan to repay it. However, they’re generally more expensive than standard mortgages and won’t be suitable for everyone. Before applying, make sure you’ve considered the costs, risks and any alternative ways of borrowing.
The right type of bridging loan depends on your circumstances, particularly whether you already have a mortgage and how you plan to repay the loan.
There are several types of bridging loan. The main differences are whether the loan takes first or second charge over your property, whether the interest rate is fixed or variable, and when you’ll need to repay the loan.
Because bridging loans are secured against property, a legal charge is placed against your home.
| Own your home outright | Own your home with a mortgage | |
| Can I get a first charge bridging loan? | Yes, if you meet the lender’s criteria. | No |
| Second charge bridging loans | You don’t need to take out a second charge loan as you can take out a first charge one, if you can meet the lender’s criteria. | Yes, if you meet the lender’s criteria. |
Most bridging loans have a fixed monthly interest rate, although some lenders offer variable rates.
The main difference between an open and closed bridging loan is when you agree to repay it.
| Open bridging loans | Closed bridging loans | |
| When can I pay back my bridging loan? | No fixed repayment date so you repay when you wish. Lenders usually require you to repay within 1 year but some lenders offer longer repayment terms. | You’ll have a fixed repayment date. |
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
A bridging loan isn’t always the right solution. Depending on your circumstances, another type of borrowing may be cheaper or more suitable. Here are some alternatives to consider.
If you don’t need to complete quickly, remortgaging may be a cheaper alternative to a bridging loan.
Remortgaging may be suitable if:
A bridging loan may be more suitable if:
If you’re considering a bridging loan because you want to buy a new home but you’re struggling to sell your existing home, a Let to Buy mortgage may be an alternative. Let to Buy means you’ll have two mortgages: you’ll need a Let to Buy mortgage for your current property and take out a standard residential mortgage for the property you want to buy.
Pros
Cons
Find out more in our guide Let to buy mortgages explained.
A secured homeowner loan could be suitable if you need to borrow against your home but don’t need the speed or flexibility of a bridging loan. Like a bridging loan, your home could be at risk if you don’t keep up repayments.
If the amount you want to borrow on a bridging loan is relatively small, you may prefer a personal loan because it doesn’t require your property as security. However, the amount you can borrow is usually much lower.
| If you want to… | You could consider… |
| Buy before selling | Bridging loan |
| Release money from your home | Remortgage |
| Keep your current home and rent it out | Let to Buy |
| Borrow a smaller amount | Personal loan |
| Borrow against your home without moving | Secured loan |
The right option depends on your circumstances. Before deciding, compare the costs, risks and timescales involved, and consider taking specialist advice if you’re unsure which type of borrowing is most suitable.
Bridging loans can be a useful short-term solution in the right circumstances, but they’re not suitable for everyone. Before applying, weigh up the benefits, costs and risks.
Bridging loan interest rates are usually quoted as a monthly rate rather than an annual percentage rate (APR). Many lenders calculate interest daily, but how and when you pay it depends on the type of loan you choose.
| Interest payment option | How this works |
| Monthly | Similar to an interest-only mortgage, you’ll pay the interest payments each month and it is not added to the loan. |
| Rolled up | Interest payments are added to the loan and paid when the bridging loan is cleared. |
| Retained | You borrow the interest upfront for an agreed period and then when the loan is paid back, any unused interest is returned to you. |
Bridging loan interest rates in the UK vary, depending on the lender, loan-to-value, property type and your exit strategy.
To get the best bridging loan interest rate, make sure you shop around. And the easiest way to do this is by using a specialist bridging loan broker. The experienced team of brokers at Fluent Money will give you free advice when securing your bridging loan.
However, there’s another potential benefit of using a bridging loan broker – unlike standard mortgages, bridging loans interest rates can sometimes be negotiated. So by using a good bridging loan broker, you could get a better rate.
A specialist broker can compare lenders and explain the different interest options available.
Our specialist bridging loan partners can discuss your personal circumstances and find you a competitive bridging loan
Think carefully before securing other debts against your asset. Your asset may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. The actual rate and fees charged will depend upon your circumstances. Ask for a personalised illustration.
This is particularly relevant when using bridging loans for house purchases, as you may temporarily own two properties.
If you use a bridging loan to buy a new property before selling your existing home, you will usually need to pay additional Stamp Duty Land Tax (SDLT).
This is because, at the point your purchase completes, you technically own two properties. In England and Northern Ireland this usually means paying the additional property surcharge on top of the standard SDLT rates.
If the new property is replacing your main residence, you can normally claim a refund of the additional SDLT once your previous home is sold. To qualify, the old property must have been your main home and it must be sold within 3 years of buying the new one, unless exceptional circumstances apply.
However, the higher rate must still be paid upfront when the purchase completes. This means you may need additional cash available in the short-term until the refund is claimed. Speak to your solicitor or conveyancer about how this affects the total funds needed to complete your purchase.
If you think you won’t be able to repay your bridging loan on time, contact your lender immediately. They may be able to extend the loan or agree another solution. Because bridging loans are secured against property, failing to repay could ultimately lead to your property being repossessed.
Yes, there are specialist lenders that offer bridging loans with bad credit, although you may need to pay higher rates. But if you do have bad credit, it’s a good idea to do everything you can to improve your credit score – find out how to do this in our guide on 11 Tips to improve your credit score for a mortgage.
Yes. Bridging loans are typically more expensive than a traditional mortgage. However, they offer flexibility and may mean you can keep a property purchase on track. Find out more about costs with this Bridging loan calculator.
This depends on how interest is charged. If it’s charged monthly, it’s similar to an interest-only mortgage where you pay the interest payments each month and it is not added to the loan. But if the interest is rolled up, it will be added to the loan and repaid when you repay the loan. Alternatively the interest may be ‘retained’, this means you borrow the interest upfront for an agreed period of time. When the loan is repaid, any unused interest is returned to you.
Yes. It is possible to use a bridging loan if you’re buying a Buy to Let property.
Yes, bridging loans can be expensive because you pay for the convenience of fast, flexible finance. However, bridging loan interest rates can be negotiated so you may get a cheaper rate by using a good bridging loan broker.
Bridging can be a good idea if you need to borrow money quickly and flexibly to keep your property transaction on track. But bridging loans are secured against property and you’ll typically pay higher rates and fees. Find out more about costs with our Bridging loan calculator.
Getting a mortgage on an auction property is possible but you’ll need to act quickly. You’ll only have 28 days to get the money to complete your purchase if you’re buying a house at a traditional auction. You’ll have more time if you’re buying via the ‘modern method of auction’. If there is a delay in getting your mortgage, you can take out a bridging loan to ‘bridge the gap’ in funding. A bridging loan can also help you buy a house at auction that isn’t quite habitable so deemed un-mortgageable.
Yes, bridging loans are commonly used for house purchases, particularly when there is a gap between buying a new property and selling your existing one. When using bridging loans for house purchases, they can help you move quickly, avoid chain breaks, or secure a property before your sale completes. However, you’ll need a clear exit strategy, such as selling your current home or remortgaging.
When used for a house purchase, a bridging loan allows you to buy a new property before selling your current one. The loan is secured against your property and is repaid once your existing home is sold or you switch to a mortgage.
A closed bridging loan is a type of bridging loan with a fixed repayment date, usually backed by a confirmed exit strategy such as an agreed property sale. Because repayment is more certain, closed bridging loans are often cheaper than open bridging loans, which don’t have a fixed end date.
Bridging loans in the UK are short-term loans, typically secured against property, designed to provide fast access to funds. They are commonly used when there is a gap between buying and selling a property. The loan is repaid once your exit strategy is completed – usually through selling your home or remortgaging.
There is no real difference between a bridge loan and a bridging loan – they refer to the same type of short-term property finance. “Bridge loan” is the term more commonly used in the US, while “bridging loan” is more commonly used in the UK. Both describe a loan designed to “bridge” a temporary gap in funding.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
HomeOwners Alliance Ltd is an Introducer Appointed Representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
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HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Fluent Money Limited, which is authorised and regulated by the Financial Conduct Authority. Calls may be monitored/recorded.
