Bridging Loan
Short-term, interest-heavy finance used to buy quickly or fund works before refinancing onto a mortgage or selling. Priced monthly, typically 6 to 18 month terms.
Bridging finance covers the gap between buying and longer-term funding. Landlords use it for auction purchases with 28-day completion deadlines, properties that are unmortgageable until works are done (no kitchen or bathroom, structural issues), heavy refurbishments, and chain breaks.
How the pricing works
Bridging is priced per month, not per year. A rate that sounds small compounds quickly once you add the fees:
- Arrangement fee, commonly around 2% of the loan
- Valuation, legal, and sometimes exit fees
- Interest, usually retained or rolled up rather than paid monthly
The true cost is best judged as the total cost of funds over your realistic term, not the headline monthly rate. A loan you planned to hold for six months but hold for ten can double the interest bill.
The exit is the deal
Lenders underwrite the exit: refinance onto a BTL mortgage or sale. Before drawing down, evidence your exit properly. For a refinance exit, check the end value and rent support the mortgage you need under ICR stress rules. Failed exits are where bridging horror stories come from.