A bridging loan is a short-term secured loan - typically 1 to 24 months - that provides fast finance while you arrange longer-term funding or complete a property transaction. It "bridges" a gap, whether that's a break in your property chain, an auction purchase deadline, or a refurbishment project before remortgage.
How Bridging Loans Work
Bridging loans are secured against property or land. Unlike a conventional mortgage, which is assessed primarily on your income, bridging lenders focus on the asset quality and your exit strategy - how you will repay the loan. Speed is a core advantage: completions in 5–10 working days are common when all documentation is ready.
Interest on a bridging loan is typically charged monthly rather than annually, and it can be rolled up (added to the loan balance and repaid at the end) rather than paid each month - making bridging accessible even when cash flow is tight during a project.
Common Uses for Bridging Finance
1. Breaking a Property Chain
If you want to buy before your current home sells, a bridging loan lets you complete the purchase using your existing property as security. Once your sale completes, you repay the bridge. This removes the risk of losing your onward purchase to another buyer.
2. Auction Purchases
Properties sold at auction require completion within 28 days - far too fast for a conventional mortgage. Bridging finance is purpose-built for this, with lenders experienced in tight auction timescales.
3. Refurbishment and Development
Unmortgageable properties - those without a working kitchen, bathroom, or habitable standard - can be purchased and renovated using a bridging loan. Once works are complete, you refinance onto a standard mortgage or sell. Heavy refurbishment and light refurbishment products exist at different rates.
4. Business Cash Flow
Commercial bridging loans can inject working capital, fund a business acquisition, or cover a tax liability - secured against commercial or residential property owned by the business or its directors.
Bridging Loan Costs - What to Budget For
| Cost | Typical Range | Notes |
|---|---|---|
| Monthly Interest Rate | 0.50% – 1.50% | Depends on LTV, credit, property type |
| Arrangement Fee | 1% – 2% of loan | Often added to loan |
| Valuation Fee | £500 – £2,500+ | Depends on property value |
| Legal Fees (lender) | £1,000 – £2,000 | Borrower pays lender's solicitor |
| Exit Fee | 0 – 1% | Not all lenders charge this |
| Broker Fee | 0 – 1% | Some brokers charge; Doulton does not on initial terms |
Regulated vs Unregulated Bridging Loans
Regulated bridging loans apply when the security property is, or will be, your main residence (or that of an immediate family member). They are governed by the FCA and carry consumer protections.
Unregulated bridging loans cover investment properties, commercial assets, land, and buy-to-let. They are faster and more flexible but fall outside FCA protection. An experienced broker can guide you on which regime applies to your case.
Exit Strategies - The Most Important Part
Every bridging lender will ask: how will you repay this loan? The two most common exit strategies are:
- Refinance: Replace the bridge with a term mortgage (residential, buy-to-let, or commercial) once works are complete or a property meets standard lending criteria.
- Sale: Sell the property and repay the bridge from net proceeds. This works for flips, downsizes, or chain breaks.
A credible, evidenced exit strategy is the single most important factor in getting your application approved quickly.