Bridging Finance Guide

Bridging Finance Guide

Bridging finance is short-term secured lending used to bridge a gap between a property purchase and longer-term finance. It is fast, flexible and expensive — use it strategically.

How Bridging Loans Work:

• Secured against property (first or second charge)
• Terms typically 1–24 months
• Interest rates: typically 0.5–1.5% per month
• Interest can be rolled up (added to the loan) or serviced monthly
• Arrangement fees: typically 1–2% of the loan
• Exit fees: some lenders charge 1% on redemption

When to Use Bridging Finance:

• Buying at auction (28-day completion required)
• Purchasing an unmortgageable property for refurbishment
• Completing a purchase before selling another property
• Funding a refurbishment before refinancing onto a buy-to-let mortgage
• Acquiring a property quickly to secure a below-market deal

Exit Strategies:

• Refinance onto a buy-to-let mortgage once the property is lettable
• Sell the property (development exit)
• Repay from the proceeds of another property sale
• Always have a primary and secondary exit strategy before drawing down

Risks to Manage:

• High cost: monthly interest compounds quickly if the exit is delayed
• Valuation risk: lender's valuation may be lower than expected
• Refinance risk: buy-to-let lender may not accept the property after refurbishment
• Always stress-test the numbers assuming a 3-month extension