What Is a Bridging Loan? A Plain-English UK Definition

A mortgage is designed to be held for years and repaid gradually from income. A bridging loan is designed to be held for months and repaid all at once from a specific event. That difference in purpose drives every other difference: how the loan is underwritten, how it is priced and how quickly it can be arranged.

The monthly interest rate on bridging loans looks small, but it is not comparable with an annual mortgage rate. At 0.75% per month, the simple annual equivalent is 9% a year, before fees. That is expensive money to hold for a long time, which is why bridging only makes sense when the term is short and the repayment route is clear.

The flip side is flexibility. A mortgage lender will usually decline a property without a working kitchen, a building with short lease issues still being resolved, or a commercial unit with no tenant. A bridging lender will often lend on exactly those assets, because it expects the borrower to fix the problem and then refinance onto a mortgage or sell.

Bridging loans explained in outline: they work in five stages. You approach a lender or broker with the property, the amount you want to borrow and your plan to repay the loan. The lender issues indicative terms, then instructs a RICS valuation. Your solicitor and the lender's solicitor check the title, searches and any leases, and the lender's solicitor prepares the legal charge. On completion the lender sends the funds to your solicitor, and the charge is registered at HM Land Registry (or the Registers of Scotland). At the end of the term, your solicitor obtains a redemption figure and you repay the loan from the sale or refinance.

Most straightforward cases take around 2 to 4 weeks, with the valuation and the solicitor work setting the pace. For the full mechanics, including gross and net advances, retained, rolled and serviced interest, and a worked example, see how does a bridging loan work; if time is tight, read our guide to fast bridging loans.

The types of bridging loans are usually described along three lines: whether there is a fixed repayment date (open or closed), where the lender sits in the queue of security (first or second charge), and whether the loan is regulated or unregulated.

Closed bridging loans have a fixed, known repayment date because the exit is already contracted. The classic example is where contracts have exchanged on the sale of another property and completion is set for a known date. Lenders see less risk, so closed bridging loans can be priced a little keener.

Open bridging loans have no fixed repayment date, only a maximum term, typically 12 months, sometimes longer. The exit is planned but not yet certain: a refinance once works finish, or a sale once a property is marketed. Most investor and developer bridging loans are open, and the lender will want credible evidence that you can repay the loan within the term.

First charge bridging loans are secured as the primary legal charge on the property, so the bridging lender is repaid first on a sale. This is the most common structure and gives access to the lowest rates and highest LTVs.

Second charge bridging loans sit behind an existing mortgage. They are used to raise money against equity without disturbing the first lender, for example to fund a deposit on another purchase. The first charge lender usually has to consent, and rates are higher because the second lender only gets paid after the first. Our guide to second charge bridging loans covers the consent process and pricing in detail.

A regulated bridging loan is one secured on a property that you or a close family member lives in, or intends to live in. Personal bridging loans of this kind, typically used by homeowners buying a new home before selling the old one, are normally regulated mortgage contracts, overseen by the Financial Conduct Authority (FCA). A bridge secured on an investment property, commercial property, land or a development site, taken for business purposes, is normally unregulated. The distinction matters because regulated loans carry consumer protections and must be arranged by an FCA-authorised firm. Construction Capital is not authorised by the FCA and arranges unregulated, business-purpose bridging only. If your loan would be secured on your home, you should take advice from an FCA-authorised adviser. Our guides to regulated bridging loans and unregulated bridging loans explain where the line falls.

Because bridging finance is secured on the asset and repaid from a specific event, it suits situations where speed matters or where the property is not yet in a state a mainstream lender will accept. The most common business-purpose uses we see are:

Bridging lending is available to individual investors, limited companies and SPVs, partnerships and trading businesses buying or refinancing residential or commercial property. Lenders look first at the property and the exit, then at the borrower: credit history, experience and assets. Company borrowers are usually asked for a personal guarantee from the directors, so personal credit still matters even when a business borrows. Adverse credit, such as a satisfied CCJ or historic defaults, narrows the choice of lender and raises the interest rate rather than ruling a deal out, provided it will not also block the refinance. First-time investors can borrow too, though usually at a lower LTV than experienced ones.

A commercial bridging loan works in a similar way, typically at 60% to 70% LTV rather than 70% to 75% for residential. Offices, retail units, industrial buildings and mixed-use commercial property are all common security; see our guide to commercial bridging loans for how lenders value them, and large bridging finance for loans into the millions.

What these uses share is a defined end point. The bridge is not the long-term funding; it is the step that makes the long-term funding, or a sale, possible.

Bridging finance costs more than a mortgage because the lender is taking short-term risk, often on assets other lenders will not touch, and doing the work in a compressed timeframe. The main costs are:

Interest: quoted per month, typically from 0.55% to 1.5% p.m. depending on LTV, the property type, the strength of the exit and the borrower's experience. At the time of writing (September 2026), the Bank of England Bank Rate is 3.75%, and many bridging lenders set their pricing with reference to it or to their own cost of funds. Arrangement fee: usually 1% to 2% of the gross loan. Valuation fee: paid up front, and higher for larger or commercial properties. Legal fees: you pay your own solicitor and, usually, the lender's. Exit fee: some lenders charge one, typically around 1%; many do not. Broker fee: where charged, agreed in writing before you proceed.

Interest can be paid monthly (serviced), deducted from the advance at the start (retained), or added to the balance and paid at the end (rolled up). Each option changes how much cash you receive on day one; our how a bridging loan works guide sets out a full example of all three.

For a full breakdown of every fee, see our guide to bridging loan costs, and for current pricing bands by LTV and property type, see UK bridging loan rates. To model your own numbers, use our bridging loan calculator.

One of the most common questions is how much a £200,000 bridging loan costs. A close second is: how much can you borrow with a bridging loan? Most lenders cap the gross loan at 70% to 75% of value, so the property below supports a loan of up to around £210,000 to £225,000. The honest answer depends on the rate and term, so here is an illustrative example rather than a quote.

The table below shows how the interest alone on a £200,000 loan moves with the monthly rate and the term, using simple (non-compounding) interest.

Two lessons stand out. First, the term drives cost as much as the rate: a loan that runs twice as long costs twice as much in interest. Second, the fees are fixed whether you hold the loan for 3 months or 12, so a very short loan carries a high effective annual cost. Plan how you will repay the loan before you borrow, and borrow for a realistic term rather than the shortest one you hope for.

Every bridging lender asks the same question first: how will you pay back this loan? The answer is the exit strategy, and it matters more than almost anything else in the application. A strong repayment plan can offset a weaker credit profile or an unusual property; a weak one can sink an otherwise good deal.

The two main exits are a sale of the property (or of another asset) and a refinance onto longer-term borrowing such as a buy-to-let mortgage, a commercial mortgage or development finance. If you plan to repay the loan through the sale, lenders want realistic comparable evidence and a marketing plan that fits inside the term. For a refinance or remortgage, they want to see that the property will meet a mainstream lender's criteria once the works are done, and that the rental income will support the new loan at current stress rates.

Build in slack. Works overrun, buyers withdraw and refinance valuations come in below expectation. Borrowing for 12 months when you expect to need 8 costs little extra if the lender allows early repayment, and it avoids the far greater cost of an extension or a default.

Bridging loans are useful, but they are not cheap and they are not forgiving. Weigh the advantages and disadvantages before you commit.

Speed. Funds in weeks rather than months, which matters at auction or when a seller wants certainty. Flexibility. Lenders will consider unmortgageable, vacant or mixed-use property and commercial property. No monthly payments where interest is retained or rolled up. Short commitment. Most loans can be repaid early after a minimum interest period.

Cost. Monthly pricing plus fees makes bridging one of the more expensive forms of secured borrowing. Held for too long, it can erode the profit in a deal. Exit risk. If the sale falls through or the refinance is declined, you still owe the full balance at the end of the term. Default costs. If the loan overruns without an agreed extension, default interest and fees can be significant; our guide to default interest rates explains how they are charged. Valuation risk. A lower-than-expected valuation reduces the loan and can leave a funding gap days before completion. Security risk. The loan is secured on property. If it is not repaid, the lender can enforce, which can include appointing receivers and selling the asset.

Consider before you borrow whether bridging is genuinely the right tool. It is the right answer when speed or flexibility is worth paying for and the exit is clear. It is the wrong answer when neither is true. We would usually steer a client elsewhere where:

The project is ground-up construction or a heavy conversion with staged costs: development finance, drawn in stages against a monitoring surveyor's reports, is usually cheaper and better suited. The property is already lettable and the timescale is relaxed: a buy-to-let or commercial mortgage will cost far less. There is no credible exit within 24 months: extending a bridge repeatedly is expensive, and lenders are wary of it. The borrowing is secured on your own home: that is regulated territory and needs advice from an FCA-authorised adviser.

For a side-by-side look at the other options, including development finance, second charge loans, refurbishment loans and equity, read our guide to alternatives to bridging loans, and for the development-specific comparison, see development finance vs bridging loans.

If you have an investment or development deal that needs short-term funding, we can review it against our panel of 100+ lenders and tell you honestly whether bridging is the right fit. Explore our bridging loans service or submit your deal for indicative terms.