Bridging Loans for Property: How the Exit Decides Everything

A bridging loan is short-term borrowing secured on property. Bridging loans are used across UK property when the timing of a purchase and the timing of longer-term funding do not line up. That is the definition, and it is nearly useless on its own, because it describes the security and the duration while saying nothing about the part that actually determines whether you get the loan.

Here is the part that does. A bridging lender is not really lending against the building. It is lending against the event that repays the loan. That event is called the exit, and it is the single thing every other term hangs from. Get the exit right and the rate, the loan to value and the term all fall into place. Get it wrong and no rate saves the deal.

That is why two borrowers can ask for the same money against the same property and receive completely different answers.

How does a bridging loan work?

The mechanics are simple enough. A lender takes a legal charge over property, advances a sum against its value, and is repaid in full on an agreed date or when the exit happens, whichever comes first. Bridging loans run 1 to 18 months on our lender panel, which is short even by the standards of short-term finance. There is no long amortisation, because you are not paying the loan down over years; you are holding it briefly and then clearing it.

Interest is handled in one of three ways, and this trips people up more than the rate does.

Retained interest means the lender holds back the interest for the whole term from the advance at the outset. You borrow less in cash than the loan says, and there is nothing to pay monthly.

Rolled up interest means the interest accrues and is settled with the capital at the end. Nothing leaves your pocket during the term, and the balance grows.

Serviced interest means you pay it monthly like any other loan, which keeps the balance flat but demands cash flow from day one.

Most development and investment bridging finance is retained or rolled up, because the whole point is that the borrower does not have income from the asset yet.

What is a bridging loan secured on?

Security is property, and the charge position matters as much as the property does. Every bridging loan is secured, and that security is why bridging loans can be arranged against stock no mortgage lender will consider.

A first charge means the bridging lender is first in line if the property is sold to repay debt. A second charge sits behind an existing lender, which is riskier for the second lender and priced accordingly, and it requires the first lender to consent.

Lenders will take security on a wide range of stock, and this is where bridging earns its place. Property that is unmortgageable in mainstream terms, a building with no kitchen or bathroom, a site with planning but no structure, a commercial unit between tenants, a part-built scheme: all of these can be secured against, because a bridging lender is pricing an asset and an exit rather than an income stream and a credit score.

Loan to value is the constraint. We arrange bridging loans up to 75 percent LTV on residential security and 65 to 70 percent on commercial bridging cases. The gap between those two numbers is not arbitrary. Commercial property takes longer to sell and has a thinner buyer pool, so the lender wants more equity underneath it.

How much does a £200,000 bridging loan cost?

Take the figure people ask about most and work it through properly, because the headline monthly rate is only part of the cost.

At the bottom of our range, 0.55 percent a month, a £200,000 bridging loan costs £1,100 a month in interest. At the top of the range, 1.0 percent a month, the same loan costs £2,000 a month. Over a 12 month term that is £13,200 at the low end and £24,000 at the high end, before anything else.

Then the arrangement fee, 1 to 2 percent of the loan, so £2,000 to £4,000 on £200,000. Then a valuation fee, which varies with the property. Then legal costs, usually both sides.

So a realistic all-in figure on a £200,000 bridging loan held for 12 months at a middling rate of around 0.75 percent a month is roughly £18,000 of interest plus £3,000 of arrangement fee plus valuation and legal. That is how much a bridging loan of this size actually costs. What you should take from it is not the specific number, which will differ on your deal, but the shape: interest is the bulk of it, and the term drives interest, so the fastest exit is nearly always the cheapest outcome.

If the loan is retained, note that the interest is deducted up front. On a £200,000 facility with 12 months retained at 0.75 percent, you receive around £182,000 in cash and repay £200,000. People are routinely surprised by that, and it is worth modelling before you commit.

Every figure here is indicative and none of it is an offer of finance. Bridging loan interest rates vary by lender, security, charge position and borrower credit, and our lender panel of over 100 lenders prices the same case differently.

What drives bridging loan interest rates?

Bridging loan rates are quoted monthly rather than annually, and our bridging finance sits between 0.55 percent and 1.0 percent a month. That spread is nearly a factor of two, so it is worth knowing what moves you along it.

Loan to value is the biggest single lever. A bridging loan at 50 percent LTV prices very differently from one at 75 percent, because the equity underneath the loan is what protects the lender if the exit slips.

Charge position is next. First charge bridging loans price below second charge, every time.

Property type follows. Residential security is the cheapest, commercial bridging is dearer, and unusual assets such as part-built schemes or specialist buildings are dearer still because the buyer pool is thinner.

Exit strength then adjusts the whole picture, which is the theme of this article.

Borrower profile and credit come last, and they matter less here than in mainstream lending. Bridging lenders take a view on credit rather than applying a score cut-off, because the loan is secured and short. Adverse credit does not close the door in the way it does on a mortgage; it narrows the panel and moves the rate.

The wider cost of money sits behind all of it. The Bank of England base rate has been 3.75 percent since December 2025, and bridging interest rates move with the cost of the funding lines behind each lender rather than tracking base rate directly. Our lender panel prices independently, which is why the same case can come back with a materially different rate from two lenders in the same week.

Open or closed: which bridging loan do you have?

This is the clearest expression of the principle that the exit is the product.

A closed bridging loan has a defined, evidenced exit with a date attached. Contracts exchanged on a sale with completion set for a known day is the classic case. The lender can see exactly what repays it and when, so a closed bridge is cheaper and easier to place.

An open bridging loan has an intended exit but no fixed date. You will sell, or you will refinance, but nothing is contractually locked. The lender is carrying uncertainty, so an open bridge prices higher and the loan to value is usually more conservative.

Most borrowers assume they are closed and discover at underwriting that they are open. Exchanged contracts, a formal mortgage offer or a signed facility agreement move you from open to closed. An estate agent’s valuation and an intention do not.

Why the exit matters more than the rate

There are only really three exits, and every one of our bridging loans uses one of them.

Sale of the security is the first: you sell the property and repay from proceeds. The lender will test whether the price is realistic and how long the sale is likely to take, and it will discount your optimism.

Refinance is the second: you replace the bridge with longer-term debt, a commercial mortgage or a buy-to-let mortgage. The lender will want to believe the refinance is actually achievable, which usually means the property has to be in a lettable or mortgageable state by then.

Sale of another asset, or an incoming lump of capital, is the third, and it needs the most evidence, because it is the one most likely not to happen.

The reason a bridging lender interrogates this so hard is that it has no long-term relationship with the loan. There is no twenty-year amortisation to absorb a problem. If the exit fails, the lender’s options are to extend, which costs you more, or to take possession, which costs everyone. So the exit is the underwriting, and a borrower who arrives with the exit evidenced gets better terms than one who arrives with a great property and a vague plan.

Are bridging loans a good idea?

Sometimes, and it depends entirely on whether the alternative exists.

Bridging finance is expensive money measured against a mortgage, and nobody should pretend otherwise. Compared with a commercial mortgage at a few percent a year, a bridge at 0.55 to 1.0 percent a month is a different order of cost. If a mainstream lender will fund the deal on the timescale you need, take the mainstream lender. Bridging loans are not meant to be held long.

Bridging is good value when the alternative is nothing. An auction lot with a 28 day completion, a property no mortgage lender will touch until it has a kitchen, a site you will lose if you wait six weeks for a term lender, a chain that collapses days before completion: in those situations the comparison is not bridge versus mortgage. It is bridge versus losing the deal.

It is a bad idea when it is being used to paper over an affordability problem, when the exit is a hope rather than a plan, or when the term is too short for the work involved. A bridge that has to be extended twice stops being cheap very quickly.

What consumer money advice gets right, and where developer lending differs

Consumer-facing money advice tends to treat bridging loans with caution, and for a homeowner audience that caution is well placed. Short-term secured borrowing at monthly rates, with fees on top and a property at risk, is genuinely dangerous for someone using it to solve a personal cash-flow problem. If you are an owner-occupier considering a bridge on your own home, take that warning seriously and get regulated advice.

Development and investment bridging is a different activity with a different risk profile. It is a working tool for buying, refurbishing and refinancing property as a business, priced for a defined job over a defined period, with an exit modelled before drawdown. The caution that applies to a consumer stretching to cover a gap does not map cleanly onto a developer using short-dated debt to convert a building and refinance onto term debt.

Both things can be true. The product is high cost and the product is appropriate, depending entirely on who is holding it and why.

Regulated or unregulated: which side is your loan on?

This decides who can help you, so it is worth establishing early.

A bridging loan secured against a property that you or a close family member occupy is a regulated contract. Those cases sit with firms that hold the relevant permissions. Construction Capital is not authorised by the FCA, so where a deal is a regulated activity we arrange it through lenders who hold the relevant FCA permissions.

A bridging loan secured on an investment property, a development site or a commercial building, taken for business purposes, is unregulated commercial lending. That is the lane we work in, and it is where nearly all developer bridging sits.

The distinction is about the property’s use rather than the borrower’s size. A single small investment flat is unregulated. A large family home is not.

What to have ready before you apply

Speed in bridging comes from preparation rather than from the lender, so bring the following.

The exit, evidenced. Not described, evidenced. A memorandum of sale, a mortgage agreement in principle, a term sheet from the refinancing lender.

The property, documented. Title, tenure, any planning consents, the schedule of works if there are works, and access for a valuer.

The numbers, honest. Purchase price, works cost with contingency, the realistic end value, and the timeline. A lender will discount your end value and extend your timeline, so build that in yourself rather than being surprised by it.

The borrowing entity. Whether it is personal, a limited company or an SPV, along with the structure behind it.

Get those in order and bridging loans can move quickly, often in a fortnight or so where the legal work keeps pace. Arrive without the exit and the fastest lender in the market cannot help you.

If you want to talk through a specific deal, we arrange a bridging loan across a panel of over 100 lenders, and we will tell you where a bridge is the wrong answer. Where the work is a conversion or a heavy refit, refurbishment finance may fit better. On a ground-up scheme, that is development finance. Where a development facility is maturing with units still to sell, look at development exit finance.

Construction Capital is a trading name of Lenzie Consulting Ltd, registered in England and Wales, company number 08174104. We are a commercial finance broker and introducer, not a lender, and we are not authorised by the FCA. Rates and terms are indicative, vary by lender and deal, and are never an offer of finance. Written by Matt Lenzie.