When does bridging finance make sense?

The short answer: bridging finance makes sense when you need money quickly for a short period and have a clear, realistic way to repay it. Typical uses are buying before you sell, completing at auction, buying a property a mortgage lender will not accept yet, or raising funds while longer-term finance is arranged. It costs more than a mortgage, so it should be used for a defined purpose and a defined period.

What is bridging finance?

A bridging loan is short-term secured lending, usually for up to 12 to 18 months, sometimes longer. Interest is normally charged monthly and is often rolled up or retained, so you do not make monthly payments. The loan is repaid in full at the end, by a sale or a refinance. That repayment route is called the exit.

When does bridging make sense?

• Buying before you sell. You have found the right home but your sale has not completed. Bridging lets you buy now and repay when your property sells.
• Auction purchases. Auctions usually require completion within 28 days, which is often too fast for a standard mortgage.
• Unmortgageable property. A property without a working kitchen or bathroom, or in poor condition, may not qualify for a mortgage until it is refurbished.
• Refurbishment and value add. Buy, improve, then refinance onto a mortgage at the higher value.
• Chain breaks and time-critical deals. When a seller needs certainty and speed.
• Raising capital quickly. Releasing equity for a business or investment opportunity while longer-term finance is put in place.

When is bridging the wrong answer?

When there is no clear exit, or the exit depends on something outside your control. If a sale is uncertain, or a refinance relies on a valuation or income that may not materialise, the cost can build quickly. Bridging should not be used to delay a problem. It works best as a planned step with a defined end.

How much does bridging cost?

Costs typically include a monthly interest rate, an arrangement fee, valuation and legal fees, and sometimes an exit fee. Because interest is charged monthly, the total cost depends heavily on how long the loan runs. A three month bridge can be very cost effective. A bridge that overruns can become expensive. That is why we focus on the exit timetable from day one.

How much can I borrow?

Lenders usually lend up to around 70% to 75% of the property value, sometimes more with additional security. For refurbishment projects, some lenders will lend against the value after works. Lending is based mainly on the property and the exit, not your income, which is why bridging suits complex situations.

Is bridging regulated?

If the loan is secured on a home you or a close family member live in, or will live in, it is usually regulated by the Financial Conduct Authority. Bridging for investment or commercial property is usually unregulated. We advise on both.

How we help

We start with the exit and work backwards. That means testing the sale or refinance plan, choosing a lender that can complete on time, and keeping the term and costs as tight as possible. See our bridging finance and structured property finance services, or speak to us about a live deal.

Frequently asked questions

This article is general information, not advice. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Some bridging and commercial finance is not regulated by the Financial Conduct Authority.