Last reviewed: June 2026
TL;DR- A bridging loan is a short-term secured loan (typically 1-24 months) used to bridge a gap in funding; a mortgage is a long-term loan (typically 25-35 years) used for property purchase.
- Bridging loans are significantly more expensive than mortgages - monthly rates of 0.5-1.5% versus annual mortgage rates.
- Bridging loans require a clear exit strategy (how the loan will be repaid); mortgages are repaid through regular monthly payments over the term.
- Regulated bridging loans (for residential properties) are subject to FCA conduct rules; unregulated bridging (for investment properties) is not subject to the same protections.
The Core Difference
A mortgage is a long-term secured loan used to finance the purchase or remortgage of a property, repaid through regular monthly payments over a term of typically 25-35 years. A bridging loan is a short-term secured loan used to "bridge" a gap in funding - typically for property purchases where speed is critical, where a property is unmortgageable in its current condition, or where funds are needed temporarily while a longer-term finance solution is arranged. Bridging loans are designed to be repaid quickly (typically within 12-24 months) from the proceeds of a property sale, refinancing onto a mortgage, or another defined exit.
Cost Comparison
The cost differential between bridging loans and mortgages is significant. Mortgage rates in 2026 are expressed as annual percentage rates (APR). Bridging loan rates are typically quoted as monthly rates - 0.5-1.5% per month - because of the short-term nature of the product. A 0.75% monthly bridging rate equates to approximately 9% annually before compounding, compared with the mortgage market average. Adding arrangement fees (1-2% of the loan), valuation fees and legal costs, the total cost of a bridging loan is materially higher than a mortgage for the same amount.
The higher cost is justified only where the bridging loan enables a transaction that could not otherwise proceed, or where the short-term cost is outweighed by the profit or benefit generated by the transaction.
When Bridging Is Appropriate
Bridging loans are used in situations where a standard mortgage is not available or suitable:
- Purchasing a property at auction, where completion is required within 28 days - too fast for standard mortgage processing.
- Buying an uninhabitable property that does not qualify for a standard mortgage.
- Chain-break bridging: buying a new property before an existing property has sold.
- Development finance: funding property conversions, renovations or small-scale development projects.
- Business purposes: short-term secured finance for business cash flow needs where a commercial mortgage is not appropriate.
Regulated vs Unregulated Bridging
Bridging loans secured on a property that the borrower or a close family member intends to live in are regulated by the FCA under the Mortgage Credit Directive, providing conduct protections equivalent to residential mortgages. Bridging loans secured on investment or commercial properties are unregulated, meaning the FCA conduct rules do not apply in the same way. Borrowers taking unregulated bridging loans have fewer automatic protections and should ensure they fully understand the terms and risks before committing.
Frequently Asked Questions
Can a bridging loan be used instead of a mortgage for a standard purchase?
Technically yes, but it would be financially irrational in most circumstances. Bridging loan costs are several times higher than mortgage costs over the same period. Using a bridging loan for a standard purchase where a mortgage is available would result in a significantly higher total cost. Bridging loans are appropriate only where a mortgage cannot be used.
How long does it take to arrange a bridging loan?
Bridging loans can typically be arranged in 1-4 weeks from application to completion, significantly faster than a standard mortgage (which typically takes 4-8 weeks). Some specialist bridging lenders offer completion in days for straightforward cases. The speed of bridging finance is one of its primary advantages over mortgages for time-critical transactions.
What is an open bridge vs a closed bridge?
A closed bridge has a fixed repayment date - typically aligned with a confirmed event such as a property sale that has exchanged contracts. A closed bridge is lower risk for the lender and typically cheaper. An open bridge has no fixed repayment date but the lender expects repayment within the agreed term (commonly 12 months). Open bridges are more flexible but typically carry higher rates than closed bridges.
Is bridging loan interest always rolled up?
No. Bridging loan interest can be structured as: rolled up (added to the outstanding balance and repaid at the end); retained (deducted from the initial loan advance at the outset, giving a lower net loan); or serviced (paid monthly during the bridging period, like a standard mortgage). The most appropriate structure depends on the borrower's cash flow position and the lender's options.
