A guide to bridging loans
Bridging loans are a powerful but specialist form of property finance. They provide short-term funding when speed is essential, but they come with higher costs and specific risks that you need to understand. This guide covers how bridging loans work, what they cost, and when they are — and are not — the right choice.
In this guide
What is a bridging loan?
A bridging loan is a short-term secured loan designed to bridge a gap in your finances. It is typically used when you need to complete a property transaction quickly and cannot wait for a traditional mortgage to be arranged, or when you need funds for a purpose that a standard mortgage lender would not cover, such as buying an uninhabitable property for renovation. They are also commonly used by buy-to-let investors looking to act quickly on opportunities.
Bridging loans are secured against property — either the property you are buying, a property you already own, or both. They are arranged much faster than standard mortgages, sometimes within days, and can be used for purchases, refinancing, renovations, and development projects.
The loan term is typically between one and 18 months, although some lenders offer terms up to 24 months. You are expected to repay the bridging loan in full at the end of the term, either by selling a property, refinancing onto a standard mortgage, or using other funds.
How much does a bridging loan cost?
Bridging loan interest rates are quoted monthly rather than annually, typically ranging from 0.4% to 1.5% per month. That equates to roughly 5% to 18% per year, which is significantly higher than a standard mortgage. The exact rate depends on the loan-to-value ratio, the property type, your exit strategy, and the lender.
In addition to interest, you will typically pay an arrangement fee of 1% to 2% of the loan amount, valuation fees, legal fees for both your solicitor and the lender’s solicitor, and potentially an exit fee. These costs add up quickly and must be factored into your calculations.
Most bridging loans use rolled-up interest, meaning the interest is added to the loan balance each month rather than being paid separately. You repay the full balance plus accumulated interest when the loan ends. Some lenders offer the option to service the interest monthly if you prefer.
What is an exit strategy and why does it matter?
Every bridging loan application requires a clear exit strategy — a realistic plan for how you will repay the loan in full at the end of the term. The lender needs to be confident that you can repay, because if you cannot, they may have to repossess and sell the secured property.
Common exit strategies include selling an existing property to repay the loan, refinancing onto a standard mortgage once a renovation is complete or a property becomes mortgageable, receiving funds from another source such as an inheritance or business sale, and selling the property you purchased with the bridging loan itself. Your exit strategy should be realistic and well-planned, whether that involves a buy-to-let mortgage or a standard residential product.
When is a bridging loan the right choice?
Bridging loans make sense when you need to act quickly and a standard mortgage cannot be arranged in time, when you are buying a property that is not currently mortgageable (for example, a derelict building), when you want to buy a new home before your existing one has sold, or when you are purchasing at auction and need to complete within 28 days.
They are not suitable as a long-term financing solution, for borrowers without a realistic exit strategy, or for situations where a standard mortgage would work if you were willing to wait. The costs of bridging are too high to use them unless the speed or flexibility genuinely justifies the premium.
How Clearview can help with bridging finance
Bridging loans are a specialist area that requires an experienced broker. At Clearview Mortgage Solutions, we work with a wide range of bridging lenders and can often arrange finance within days when time is critical.
We’ll assess your situation, make sure a bridging loan is genuinely the right solution, negotiate competitive terms, and ensure your exit strategy is robust. Contact us for a free, no-obligation consultation.
Related guides
More guides in our bridging loans mortgage hub.
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