A bridging loan is a short-term, secured loan (typically lasting 1–18 months) used to 'bridge' a financial gap — most commonly when buying a new property before selling an existing one. Interest rates are higher than standard mortgages, and a clear exit strategy is required.
What Is a Bridging Loan?
A bridging loan is a type of short-term secured finance that "bridges" a gap between two transactions. It's secured against property (your current home, the property you're buying, or both) and is designed to be repaid quickly — usually within 1–18 months.
Think of it as temporary finance that lets you act fast when timing is critical.
When Are Bridging Loans Used?
- Buying before selling: You've found your dream home but haven't sold your current property yet
- Auction purchases: You need to complete within 28 days and can't arrange a mortgage that fast
- Chain breaks: A sale falls through and you need quick finance to keep your purchase alive
- Renovation projects: The property is unmortgageable in its current state — bridge the gap while you refurbish
- Downsizing: Buy the smaller property first, then sell the larger one at your own pace
- Business purposes: Releasing equity quickly for a business opportunity
Open vs Closed Bridging Loans
| Type | What It Means | Typical Rate |
|---|---|---|
| Closed | You have a fixed repayment date (e.g., your property sale completes on a set date) | Lower (0.4%–0.8%/month) |
| Open | No fixed repayment date — you'll repay when you can (within the term) | Higher (0.7%–1.5%/month) |
Closed bridging loans are cheaper because the lender has more certainty about when they'll be repaid.
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How Much Does a Bridging Loan Cost?
Example: £300,000 Bridging Loan for 6 Months
- • Monthly interest at 0.7%: £2,100/month (£12,600 total)
- • Arrangement fee (1.5%): £4,500
- • Valuation fee: £500–£1,500
- • Legal fees: £1,000–£2,500
- • Total estimated cost: £19,100–£21,100
Interest can be paid monthly, or "rolled up" (added to the loan balance and paid at the end). Rolling up is common — it means no monthly payments, but the total cost is higher.
The Risks You Need to Know
- High cost: Interest is significantly more expensive than a standard mortgage
- Property at risk: The loan is secured against your property — if you can't repay, you could lose it
- Exit strategy failure: If your property doesn't sell in time, costs escalate rapidly
- Double charges: You may be paying your existing mortgage AND bridging loan interest simultaneously
- Hidden fees: Check for exit fees, extension fees, and admin charges
Alternatives to Bridging Loans
Before committing to a bridging loan, consider whether these alternatives might work:
- Port your existing mortgage to the new property
- Negotiate a longer completion with the seller to align timings
- Sell first, rent temporarily — avoids bridging costs entirely
- Family loan — short-term borrowing from family (put it in writing)
- Let to Buy: Let your current home and use rental income to support a new mortgage
Speak to a Mortgage Adviser
Get expert, advice across a comprehensive panel of 90+ lenders tailored to your situation. We'll find the right deal — and any costs are always agreed upfront.
Get Expert Advice Before You Decide
Bridging loans can be the right solution in specific situations, but they're not suitable for everyone. Our advisers offering free initial advice can help you understand whether a bridging loan makes sense — or whether a simpler, cheaper alternative exists.
Frequently Asked Questions
- How much does a bridging loan cost?
- Interest rates are typically 0.4%–1.5% per month (roughly 5%–18% per year). Plus arrangement fees of 1–2% of the loan, valuation fees, and legal fees. They're significantly more expensive than standard mortgages.
- How long can you have a bridging loan for?
- Typically 1–18 months, though some lenders offer up to 24 months. They're designed to be short-term — if you need finance for longer, a standard mortgage or development finance may be more suitable.
- Can I get a bridging loan with bad credit?
- It's possible but harder. Some specialist lenders consider applications with adverse credit, but you'll pay higher rates. The strength of your exit strategy matters more than with standard mortgages.
- What is an exit strategy for a bridging loan?
- It's your plan for repaying the loan. Common exits include: selling your current property, remortgaging to a standard mortgage, selling the bridged property, or using other funds. Lenders won't approve without a credible exit.
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