How Do Bridging Loans Work?

A bridging loan is a short-term loan secured on property. It helps you move fast when other finance would take too long.

This guide explains how bridging loans work, what they cost and when they make sense.

What is a bridging loan?

A bridging loan fills a gap. You borrow now and repay when money comes in later, often from a sale or a new mortgage.

Terms are short, often up to 12 or 18 months. The loan is secured on property, which can be your home, a buy to let or a commercial building.

When do people use bridging loans?

• To buy a new home before the old one sells
• To buy at auction, where you must complete in a set time
• To buy a property that a lender will not yet lend on, such as one with no kitchen
• To fund work before moving onto a normal mortgage
• To release cash for a business while other finance is arranged

How do you pay it back?

Every bridging loan needs a clear way out. Lenders call this your exit. It is often the sale of a property or a new mortgage.

Lenders look hard at your exit before they agree the loan. If the exit fails, you could face extra costs or lose the property.

What does a bridging loan cost?

Interest is charged each month, and rates are higher than a normal mortgage. You may pay the interest each month, or add it to the loan to pay at the end.

There are often other costs too, such as an arrangement fee, a valuation fee and legal fees. Ask for the full cost, not just the rate.

Open and closed bridging

A closed bridging loan has a fixed date to repay, often because you have already agreed a sale. An open bridging loan has no fixed date, but you still need a clear plan to repay.

Can you get one outside Derby?

Yes. We arrange bridging loans in Derby, the Midlands and across the UK. The lender values the property where it is, and we run the case by phone, video call and email.

Frequently asked questions

How fast can I get a bridging loan?

It depends on the case, the valuation and the legal work. Simple cases can complete in a few weeks.

How long can a bridging loan last?

Most bridging loans last up to 12 or 18 months. Some lenders offer longer terms.

Do I need a deposit for a bridging loan?

Usually, yes. Lenders lend a share of the property value, so you need to fund the rest or offer other property as security.

What happens if I cannot repay on time?

You may pay extra interest and fees, and the lender could take the property. This is why a clear exit plan matters.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Think carefully before securing other debts against your home.

There may be a fee for our advice. We will always tell you about any fee before you commit to anything.