What is a bridging loan?
A bridging loan is a short-term loan secured against property, designed to "bridge" a gap in funding — most often between buying one property and selling or refinancing another. Where a mortgage takes weeks or months to arrange, bridging can complete in days, and lenders are far more flexible about the condition of the property they lend against.
Loans typically run from a few weeks up to 12 months (occasionally 24 for unregulated loans), with interest charged monthly rather than annually. You can pay that interest each month or roll it up — adding it to the loan and settling everything when you repay. Rolled-up interest is popular when the property produces no income during the loan, such as a renovation project.
When are bridging loans used?
The classic uses all share one feature: speed or flexibility that a mortgage can't provide.
Auction purchases. Auction contracts usually require completion within 28 days of the hammer falling — far too fast for most mortgage applications. Bridging is the standard tool; see our guide to the best bridging loans for auctions.
Chain breaks and buying before you sell. If your buyer pulls out, or you've found the right home before yours has sold, bridging lets you complete now and repay when your sale goes through. We cover the structures in bridging for chain breaks and buying before you sell.
Unmortgageable property. No working kitchen or bathroom, structural problems, short leases — mainstream lenders decline these, bridging funds them. Investors buy, refurbish, then sell or refinance; see bridging for renovations.
Land and development. Bridging buys land or funds a project ahead of longer-term development finance.
How much do bridging loans cost?
Bridging is priced monthly, and it costs meaningfully more than a mortgage — the trade for speed and flexibility. Expect three cost layers:
Interest is typically in the range of 0.5–1.5% per month depending on the loan-to-value, property type and your exit. On a £200,000 loan at 1% per month, that's £2,000 a month, or £12,000 over a six-month term if paid monthly.
Fees usually include a lender arrangement fee of 1–2% of the loan, a valuation fee, legal costs for both sides, and sometimes an exit fee. On the same £200,000 loan, a 2% arrangement fee adds £4,000.
Rolled-up interest compounds, so a 12-month roll-up costs more than 12× the monthly rate. Always compare the total cost to exit — interest plus every fee — rather than the headline monthly rate. A whole-of-market broker will price this across lenders for you.
What is an exit strategy?
Your exit is how the loan gets repaid, and it's the single thing bridging lenders care most about. The two standard exits are sale (of the bridged property or another asset) and refinance (onto a residential, buy-to-let or commercial mortgage once the property qualifies).
A strong exit does two jobs: it gets you approved, and it gets you a better rate — lenders price risk, and a confirmed sale or an agreed refinance in principle is low risk. Build a time buffer into your term: if your exit is selling your home, assume a slow market, not a fast one. Running past the end of a bridging term is expensive, so a 9–12 month term with a 6-month plan beats the reverse.
Regulated vs unregulated bridging
If the loan is secured against a home you (or family) live in or will live in, it's a regulated bridging loan, overseen by the FCA with consumer protections to match. Loans against investment property, commercial premises or land are usually unregulated — standard for landlords and developers, with more flexible terms but fewer protections.
The distinction matters when choosing lenders: some only operate in one half of the market. A broker will place you correctly from the start.
Is a bridging loan right for you?
Bridging is the right tool when the situation is genuinely short-term and the numbers work after all costs: an auction bargain, a broken chain threatening a purchase, a renovation with a clear profit margin. It's the wrong tool for long-term borrowing, for covering general cash-flow problems, or when the exit is hopeful rather than realistic.
Two quick tests: could a cheaper product (a mortgage, a secured loan, a further advance) do the job if you waited a few weeks? And does the deal still make sense if your exit takes three months longer than planned? If either answer is uncomfortable, talk it through with a specialist before committing.
How to get the best bridging deal
Bridging pricing varies enormously between lenders, and many of the sharpest lenders work only through brokers. To get the best terms: keep the loan-to-value as low as you can (more equity means better pricing), have your exit documented before you apply, prepare the property paperwork early, and compare total cost to exit rather than monthly rate.
Nesto can match you with an FCA-regulated bridging specialist who knows which lenders suit your property, timescale and exit — free and with no obligation. Find a bridging finance specialist.
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