Bridging loans

A bridging loan (or bridge loan) is a short-term loan designed to ‘bridge the gap’ between making a payment and receiving funds – for example, when you want to buy a new property but haven’t yet sold your existing one. 

A bridging loan is a secured loan. That means you’ll need to use a high-value asset, such as your home, as security for the loan. But you typically pay back a bridging loan in a shorter amount of time than other types of secured loan – sometimes as little as a few weeks. 

Let’s say you’re moving house and need a £100,000 deposit to put towards the new property. But you haven’t yet sold your current house and only have £20,000 in savings. That leaves you with a shortfall of £80,000 for the deposit. 

You could potentially take out a bridging loan for £80,000 to ‘bridge the gap’ until you sell your existing property. Once that property sells, you repay the bridging loan plus interest. 

With our partner broker Fluent Money², you can compare options from multiple FCA-approved lenders in one place to help you find the right bridging loan.

Bridging loans are often used for: 

• Buying property at auction 

• Buying land 

• Fixing a broken property chain after a sale falls through 

• Property development and renovations 

• Buy-to-let investments 

• Raising capital for business ventures 

• Short-term cash flow or debt consolidation. 

The amount you could borrow with a bridging loan depends on your credit rating and the value of your property. Loans can range from £20,000 to £30 million. Each loan provider will have its own lending limits. 

To reduce the risk, lenders are usually only willing to lend up to 75% of a property’s value. 

Bridging loan interest rates might initially look low compared to other loan types, but that's because interest is charged monthly rather than annually – so you might not be comparing apples with apples. The annual equivalent can be much higher – for example, a 2% monthly rate translates to a 26.82% annual rate. 

In reality, bridging loans tend to be pricier than other types of loans.

When considering the total cost of a bridging loan, you’ll also need to factor in set-up fees. These could include: 

• Arrangement fees 

• Valuation fees to cover the cost of sending a surveyor to value your property 

• Exit fees when you repay your loan (rare) 

• Administration/repayment fee to cover the cost of paperwork at the end of the loan period 

• Legal fees.