Bridging Finance

Bridging Loan Guide

Everything you need to know about bridging loans. How they work, the different types, what they cost, and how to apply. A comprehensive guide from Doulton Bridging Finance.

The Basics

What is a bridging loan?

A bridging loan is a short-term, property-secured loan designed to "bridge" a financial gap. They are typically used when you need fast access to funds and a conventional mortgage is either too slow or not available for your situation.

Bridging loans are commonly used to purchase property at auction, fund refurbishments, prevent chain breaks, cover tax bills, or release equity quickly. Terms typically range from 1 to 18 months, and the loan is repaid through a defined exit strategy such as a property sale or remortgage.

Unlike standard mortgages, bridging loans are assessed primarily on the value of the security property and the strength of your exit strategy, rather than your income. This makes them accessible to a wide range of borrowers, including those with complex financial situations.

Types of Bridge

Understanding the different types

First Charge

The bridging loan is the primary debt secured against the property. This is the most common type and attracts the lowest rates because the lender has first claim on the asset.

Second Charge

The bridging loan sits behind an existing mortgage. Rates are higher because the lender takes on more risk, but it means you do not need to repay your existing mortgage first.

Regulated

Regulated bridging loans are secured against a property you or a close family member currently live in, or intend to live in. These are governed by the FCA and offer additional consumer protections.

Unregulated

Unregulated bridging loans are used for investment properties, commercial assets, or development projects. They offer more flexibility in terms and structure but without FCA consumer protections.

Open Bridge

An open bridging loan has no fixed repayment date, though typically a maximum term of 12 months. Suitable when the exit timing is less certain, such as waiting for a property sale.

Closed Bridge

A closed bridging loan has a defined repayment date, often tied to a confirmed property sale or remortgage completion. Rates are typically lower because the lender has more certainty.

Costs Breakdown

What does a bridging loan cost?

Interest Rate

Typically charged monthly, ranging from 0.49% to over 1% per month depending on the deal. Interest can be paid monthly, deducted upfront (retained), or rolled up and paid at the end.

Arrangement Fee

Usually 1% to 2% of the loan amount, charged by the lender. This can often be added to the loan rather than paid upfront, though this increases your total borrowing.

Valuation Fee

A RICS-accredited surveyor must value the security property. Costs vary by property value and type, typically starting from a few hundred pounds for standard residential.

Legal Fees

You will need a solicitor, and the lender will have their own legal representation (sometimes dual representation is possible). Budget for both sets of legal costs in your planning.

Exit Fee

Some lenders charge an exit fee (typically 1% to 1.25%) when the loan is repaid. Not all lenders charge this, so it is worth comparing the total cost of borrowing, not just the interest rate.

Broker Fee

At Doulton Bridging Finance, our fee is transparent and agreed upfront. We earn a commission from the lender, and any additional fee is clearly disclosed before you proceed.

Exit Strategies

How you repay the loan

Every bridging loan needs a clear exit strategy. This is how you plan to repay the loan at the end of the term. Lenders assess the strength of your exit before approving the loan, so a well-defined plan is essential.

Property Sale

The most common exit. The property used as security (or another asset) is sold, and the proceeds repay the bridging loan. An accepted offer or exchange of contracts strengthens this exit.

Remortgage

Refinancing onto a conventional mortgage or buy-to-let product. Particularly common when the bridge was used to purchase quickly and there is time to arrange a standard mortgage afterwards.

Development Finance

For developers, the bridge may be repaid by drawing down a longer-term development facility once planning or site preparation is complete.

Cash or Other Funds

Repayment from savings, inheritance, business revenue, pension release, or other liquid assets. The lender will want evidence that these funds will be available within the loan term.

Application Process

How to apply

Initial Enquiry

Share your requirements with a broker or lender. You will need details about the property, loan amount, purpose, and your planned exit strategy.

Terms Issued

If the deal is viable, you receive an indicative terms sheet outlining the rate, fees, LTV, and conditions. This is typically issued within hours of your enquiry.

Valuation and Legal

A RICS valuation is instructed and solicitors are appointed. These run in parallel to save time. The lender reviews the valuation before issuing a formal offer.

Completion

Once all conditions are met and legal work is complete, the loan is drawn down and funds are released. Typical timelines range from 7 to 28 days depending on complexity.

Important Considerations

Risks to be aware of

Bridging loans are a powerful financial tool, but they are not without risk. The property used as security could be repossessed if you fail to repay the loan. Interest costs can accumulate quickly, especially if your exit strategy is delayed.

It is essential to have a realistic exit strategy and a contingency plan in case things do not go as expected. Working with an experienced broker like Doulton Bridging Finance helps ensure you borrow responsibly, with terms that are appropriate for your situation and a clear path to repayment.

We always encourage borrowers to take independent legal advice and to fully understand the costs and obligations before proceeding with any bridging finance.

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FAQs

Frequently asked questions

What is a bridging loan and when is it used?

A bridging loan is a short-term property-secured facility, usually 1-24 months, used to 'bridge' a funding gap - for example between buying a new property and selling an existing one, completing an auction purchase within 28 days, breaking a property chain, or funding works before refinancing onto a mortgage.

How much can I borrow on a bridging loan?

We arrange bridging from £25,000 up to £100m+. Typical LTVs are up to 75% on residential, 70% on commercial, and up to 80% on larger prime deals. Second-charge bridging is available up to around 65% LTV.

How fast can a bridging loan complete?

Straightforward cases can complete in 5-10 working days. Complex security, multiple parties, or additional diligence typically adds 1-2 weeks. Valuation and legal turnaround - not lender underwriting - usually drive the overall timeline.

What exit strategies do lenders accept?

The most common exits are (1) sale of the security property or another asset, (2) refinance onto a mortgage, and (3) receipt of expected funds (probate, business cash flow, drawdown of other finance). Lenders stress-test the exit alongside the loan.

What are typical bridging rates and fees?

Rates currently start from around 0.49% per month and rise based on risk, LTV and property type. Expect arrangement fees of 1-2%, valuation fees of £300-£1,500, and legal fees of £1,500-£3,000. Interest can be serviced monthly, retained upfront, or rolled up.

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