TL;DR
Bridging loans are short-term secured finance typically lasting 3 to 24 months at rates of 0.4 to 1.5 percent per month. The biggest risk is the exit strategy — if you cannot repay on time through sale or refinance, the lender can appoint a receiver and sell your property. Never take a bridging loan without a confirmed, realistic exit route.
Last reviewed: June 2026 | Sources: FCA, HMRC, FOS
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Property Finance Before You Take a Bridging Loan Typical term: 3-24 monthsMonthly rate: 0.4-1.5% per monthAnnual equivalent: 5-20% APRMax LTV: typically 70-75%Exit required: sale or refinance — confirmed before drawdown |
What a bridging loan is and how it works
A bridging loan is a short-term secured loan designed to bridge a gap in funding — typically between purchasing one property and selling another, or between purchasing a property and refinancing onto a long-term mortgage. The loan is secured against property and is repayable in full at the end of the agreed term, typically between three and 24 months. Interest is usually rolled up into the loan rather than paid monthly, meaning the full amount plus accumulated interest is repaid on exit.
Bridging loans are offered by specialist lenders rather than high street banks and are not regulated by the FCA where they are used for business or investment purposes. Residential bridging loans — where the borrower or a family member intends to occupy the property — are regulated and subject to FCA consumer protections. The distinction matters because unregulated bridging loans have fewer consumer protections and require greater borrower diligence.
The exit strategy is the most critical factor
Every bridging loan must have a clearly defined exit strategy — the confirmed route by which the loan will be repaid at the end of the term. The two most common exit routes are sale of the property and refinance onto a long-term mortgage. A bridging loan without a realistic, confirmed exit is one of the most dangerous financial products a borrower can take on.
Lenders will ask for evidence of the exit strategy before approving a bridging loan. A sale exit requires evidence of a buyer or strong market evidence that the property will sell within the loan term. A refinance exit requires evidence that the borrower can obtain a long-term mortgage — for example, by obtaining a decision in principle from a mortgage lender before drawing the bridging loan. If the exit fails — the property does not sell or the refinance is declined — the lender can appoint a receiver and force a sale at whatever price the market offers, which may be significantly below market value.
How bridging loan interest is calculated
Bridging loan interest is quoted as a monthly rate rather than an annual rate. A rate of 0.75 percent per month compounds to approximately 9.4 percent APR — significantly higher than a standard mortgage. Because interest is typically rolled up rather than paid monthly, the total loan balance grows throughout the term. On a £200,000 bridging loan at 0.75 percent per month over 12 months with rolled-up interest, the total repayable is approximately £224,000 — before arrangement fees, exit fees, legal fees and valuation costs.
Arrangement fees of one to two percent of the loan amount are charged at drawdown and are typically added to the loan. Exit fees of one percent may apply at repayment. Legal fees, valuation fees and broker fees add further to the total cost. The total cost of a bridging loan over 12 months including all fees is frequently 12 to 20 percent of the loan amount or more.
When a bridging loan is and is not appropriate
Bridging loans are appropriate where there is a genuine short-term funding gap with a confirmed exit, the cost of the bridging loan is outweighed by the benefit of the transaction, and the borrower has sufficient equity in the security property to comfortably service the loan plus costs. Common legitimate uses include purchasing at auction where completion is required within 28 days, chain-break finance where a buyer needs to complete on a purchase before their own sale completes, and light refurbishment where a property cannot be mortgaged in its current condition.
Bridging loans are not appropriate as a last resort where all other finance has been declined, where the exit strategy is speculative rather than confirmed, or where the borrower cannot afford the loan if the exit takes longer than anticipated. Using a bridging loan to buy time while hoping a problem resolves itself is a path that has led many borrowers to lose their properties.
Bridging Loan: Total Cost Example on £200,000 Loan
| Cost Item | 6 Months | 12 Months | 18 Months |
|---|---|---|---|
| Interest (0.75%/mo rolled up) | £9,230 | £18,882 | £29,025 |
| Arrangement fee (1.5%) | £3,000 | £3,000 | £3,000 |
| Exit fee (1%) | £2,000 | £2,000 | £2,000 |
| Legal + valuation | £2,500 | £2,500 | £2,500 |
| Total cost above loan | £16,730 | £26,382 | £36,525 |
| Total repayable | £216,730 | £226,382 | £236,525 |
Source: Illustrative only. Rates and fees vary by lender. Get a full cost illustration before proceeding.
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Disclaimer This article is for information only and does not constitute regulated financial advice. Kael Tripton Ltd is an independent editorial publisher and is not regulated by the FCA. |
Frequently asked questions
Are bridging loans regulated by the FCA?
Residential bridging loans — where the borrower or a close family member will occupy the property — are regulated under the Mortgage Credit Directive and carry FCA consumer protections. Commercial and investment bridging loans are unregulated, meaning FCA rules on affordability assessment and consumer protection do not apply. Always check whether your bridging loan is regulated before proceeding.
What happens if I cannot repay my bridging loan on time?
If you cannot repay on the agreed date, the lender may agree a short extension, typically with additional fees and higher interest. If no agreement is reached, the lender can appoint a Law of Property Act receiver who has the power to sell the security property at their discretion. The receiver's duty is to the lender, not the borrower — a forced sale may achieve significantly below market value.
What is the maximum LTV on a bridging loan?
Most bridging lenders offer a maximum of 70 to 75 percent LTV on a first charge basis. Second charge bridging loans, where the bridging lender takes a second security position behind an existing mortgage, typically have lower maximum LTVs of 65 to 70 percent of the combined loan. Higher LTV bridging is available from some lenders but carries higher rates.
Can I get a bridging loan with bad credit?
Specialist bridging lenders assess applications primarily on the strength of the security property and the exit strategy rather than on the borrower's credit score. Adverse credit does not automatically disqualify a borrower from a bridging loan, but it will affect the rate offered and the lender's assessment of the exit risk.
Do I need a broker for a bridging loan?
Most bridging lenders work exclusively through FCA-authorised brokers rather than directly with borrowers. A whole-of-market specialist bridging broker can access lenders and rates not available directly and can advise on the suitability of the exit strategy. Verify any broker is FCA-authorised at register.fca.org.uk before proceeding.
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Sources FCA: Regulated Mortgage Contracts |
