How Bridging Loans Work

A bridging loan works by a lender taking a legal charge over property and advancing a lump sum against it, on the understanding that the debt is short term and will be cleared in full within a defined window. That window is usually 3 to 18 months, and the loan is repaid through a specific exit event, most often a property sale or a refinance onto longer-term finance. The whole product is built around that exit, not around monthly affordability, which is what makes it behave so differently from a mortgage.

The first mechanic to understand is the charge. A first charge means the bridging lender is the primary claim against the property, ahead of anyone else, which is the standard position and the cheapest. A second charge sits behind an existing first-charge lender (for example, a mortgage that is staying in place), so the bridging lender is further back in the queue if things go wrong. Second charges carry more risk for the lender, so they price higher and fewer lenders offer them, but they let you raise money against equity without disturbing a facility you want to keep.

Next is the day-one advance and LTV. The lender assesses the property's value, usually via a formal valuation, and lends a percentage of it. That percentage is the loan-to-value, and for bridging it typically sits somewhere up to around 70% to 75% of value, lower on riskier or specialist security. On some cases the lender works to a lower figure day one and releases more in stages, for example against a refurbishment. Land, unusual assets, or a shaky exit all tend to pull the available LTV down. These figures are indicative; the actual LTV is the lender's call on your specific security and plan.

Then comes the interest, and this is where bridging surprises people. Rather than paying interest monthly, most bridging is set up with rolled-up interest, meaning the interest is added to the balance each month and settled in one lump at the end, alongside the capital. That keeps your monthly outgoings at zero during the term, which suits projects with no rental income yet. The alternative is serviced interest, where you pay it monthly like a normal loan, which keeps the final redemption figure lower. Some lenders offer a retained-interest structure, where they hold back the interest from the advance up front. Monthly rates are illustrative and case-specific, but the market broadly runs from around 0.39% to 1.5% per calendar month depending on charge, LTV, and security quality. The lender prices the case; no broker sets that rate.

The term and the exit are inseparable. Because the loan is short, the lender wants to see a credible, evidenced route to repayment before the term runs out, with enough headroom if things slip. A sale needs a realistic price and marketing plan; a refinance needs a lender likely to take you out and a broad sense of the numbers stacking up. The exit is the single thing a bridging lender interrogates hardest. What kills deals is a vague exit, a term too short for the plan, or an LTV that leaves the lender exposed if values dip. We have watched lenders decline perfectly good security because the exit did not read as credible on paper.

Common uses follow directly from those mechanics. At auction, completion is usually contractual within 28 days, far faster than a mortgage can move, so a bridge covers the gap until you refinance or sell. In a chain break, a bridge lets you buy before your existing property sells, then repays on that sale. For a refurb, the bridge funds purchase and works where a mainstream lender will not lend on an unmortgageable property, with the exit being a sale or a refinance once the property is habitable and revalued. On land, bridging can fund a site ahead of planning or a development facility, though lenders treat land cautiously and lend less against it.

The broker role is to match the case to lenders who will actually do it. No broker can promise a rate or an approval before a lender has seen the file, and anyone who does is guessing. What we do is tell you quickly which lenders are genuinely open to your security type, your exit, and your timeline, package the case so the exit reads credibly, and get the right lender instructed fast. We place the deal; the lender prices it and decides.