Bridging Loans UK Guide (How They Work, Costs, Alternatives)

How Bridging Loans Work

A bridging loan works as a short-term secured loan against a property you own or are purchasing. The loan is typically arranged for 1–12 months, with some lenders offering terms up to 24 months. You repay the principal and interest when the "exit strategy" completes — usually the sale of your existing property, receipt of a mortgage offer, or completion of a property development project. There are two main types of bridging loans: open bridging loans and closed bridging loans. A closed bridging loan has a fixed repayment date tied to a known event (e.g., exchange of contracts on your property sale). These have lower interest rates because the exit strategy is confirmed. An open bridging loan has no fixed repayment date, meaning the exit strategy is uncertain (e.g., your property is on the market but not yet sold). These carry higher interest rates and higher risk for lenders. Bridging loans are secured with a first or second charge on the property. The loan-to-value (LTV) ratio is typically up to 75% of the property value, though some lenders offer up to 80% for lower-risk closed loans. Interest is usually rolled up (added to the loan balance and repaid at the end) rather than paid monthly, which preserves cash flow during the loan period. A valuation fee (typically £250–£1,000), arrangement fee (1–2% of the loan amount), legal fees (£500–£1,500), and exit fee (often £100–£500 or a percentage of the loan) add to the total cost.

Typical Costs and Interest Rates

Bridging loans are significantly more expensive than standard mortgages. The monthly interest rate typically ranges from 0.5% to 1.5% per month, which equates to approximately 6–18% per annum. However, unlike a mortgage where you pay interest monthly, bridging loan interest is usually retained (deducted from the loan amount upfront) or rolled up (added to the total balance to be repaid at the end). For example, a bridging loan of £200,000 at 0.8% per month over 12 months would incur interest of £19,200. Adding arrangement fees (2% = £4,000), valuation (£500), legal fees (£1,000), and exit fee (£250), the total cost of borrowing is approximately £24,950. If your exit strategy is delayed by even a month, additional interest accrues — open loans are particularly exposed to this risk. Early repayment charges may apply if you repay within a minimum period (typically 1–3 months), but most bridging loans have no early repayment penalty after this period, unlike some mortgage products. Always compare the total cost of borrowing across lenders, not just the monthly interest rate. Specialist bridging finance brokers can access a range of lenders and negotiate better terms. Comparison websites like MoneySuperMarket and Compare the Market do not typically list bridging loans — you may need a specialist broker such as Brightstar, CompleteFS, or MFS.

When to Use a Bridging Loan

Bridging loans are suitable for specific situations in the UK property market, but they are not a general-purpose borrowing tool. Common use cases include: chain breaks — when you need to complete on a property purchase before your existing property sale completes, to avoid losing your dream home. Auction purchases — property auctions require completion within 28 days, which is too fast for a standard mortgage. Bridging finance allows you to complete the purchase while arranging a long-term mortgage. Property development — developers use bridging loans to purchase land or property, fund renovations, and repay when the development is sold or refinanced. Delayed mortgage — if you are waiting for a mortgage application to process but need to exchange contracts quickly. Probate and inheritance — to release equity from an inherited property before it is sold. Business purposes — businesses may use bridging loans to secure commercial property or fund time-sensitive opportunities. Bridging loans are not suitable for: covering ongoing cash flow shortfalls, consolidating unsecured debts, or funding long-term property investment. If you need longer-term borrowing, a secured homeowner loan or remortgage is typically cheaper and more appropriate. See our Secured Loans guide → for alternatives.

FCA Regulation and Consumer Protections

Most bridging loans in the UK are regulated by the FCA under the Mortgage Credit Directive, but there are exceptions. A bridging loan is regulated if all of these apply: the loan is secured on land (property) in the UK, the borrower is an individual (not a company or trust), the loan is for a purpose other than business, and the loan is not classified as a "large loan" (over £60,260 in 2026) made by a business. If the loan is taken out through a limited company or for business purposes, it is typically unregulated, meaning you do not have FCA protections such as the cooling-off period, affordability assessment requirements, or access to the Financial Ombudsman Service. For regulated bridging loans, the FCA requires the lender to: assess affordability, provide a European Standardised Information Sheet (ESIS) with clear cost breakdown, offer a 14-day cooling-off period during which you can cancel, and follow strict rules if you fall behind on payments. Always check whether the bridging loan is regulated or unregulated. If you are borrowing as an individual (not through a company), insist on an FCA-regulated lender. Verify authorisation on the FCA Register before proceeding.

Alternatives to Bridging Loans

Given the high costs of bridging finance, explore alternatives before committing. Remortgage to raise funds — if you have sufficient equity in your current property, a remortgage can release cash at mortgage interest rates (4–7% APR instead of 6–18% per annum equivalent). The process takes 4–8 weeks. Secured homeowner loan — a second charge loan secured against your home at lower rates than bridging finance. See our Secured Loans guide →. Extended mortgage offer — some lenders offer mortgage extensions or porting, allowing you to keep your current mortgage rate when moving. Chain break insurance — insurance products exist that cover the cost if your property chain collapses, potentially reducing the need for bridging finance. Personal loan for smaller gaps — if the gap is relatively small (under £25,000), a personal loan may suffice. See our Personal Loans guide →. Family loan — borrowing from family with a formal written agreement. Vendor extended completion — negotiate a longer completion period with the seller, reducing the need for short-term bridging. Always speak to a mortgage broker or independent financial advisor before taking out a bridging loan. The costs are substantial, and alternatives often provide cheaper solutions.

FAQs

How quickly can I get a bridging loan in the UK?

Bridging loans can complete in 1–4 weeks, depending on the lender, property valuation, and whether legal work is straightforward. Specialist bridging lenders process faster than high street banks. Some lenders offer "fast-track" bridging with completion in under 7 days for low-risk cases.

What is the maximum LTV on a bridging loan?

Typically up to 75% LTV for closed bridging loans and 60–65% for open bridging loans. Some lenders offer up to 80% LTV for very low-risk closed loans. The maximum loan amount varies by lender, but most specialist lenders offer up to £2 million or more.

Can I get a bridging loan with bad credit?

Yes, but it is more difficult and expensive. Some specialist bridging lenders consider applications with CCJs, defaults, or IVAs, especially if there is significant equity in the property and a clear exit strategy. You will pay higher monthly interest rates (1–1.5%+ per month) and lower LTV limits.

What happens if I cannot repay the bridging loan on time?

If you cannot repay on time, the lender may charge default interest (typically an additional 2–4% per annum on top of the existing rate). Continued non-payment can lead to repossession of the property. Always have a realistic exit strategy before taking out a bridging loan.

Are bridging loans regulated by the FCA?

Yes, when taken by an individual (not a business) for a non-business purpose. Business-purpose bridging loans through limited companies are typically unregulated. Always check the lender is FCA-authorised and whether the loan is regulated. Unregulated loans lack FCA consumer protections.