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What Are The Fees Involved With a Bridging Loan?

There are a number of fees involved with a bridging loan, starting with arrangement fees of 1-3% and monthly interest from 0.5%-2% per month. 

Other fees include paying valuation and legal fees, and these can increase based on the complexity of the property and number of hours needed by your solicitor.

It is important to take all fees into consideration when calculating the potential profit margins when purchasing a property. 

The main fees include:

Fee TypeTypical Cost / Range
Arrangement Fee1% – 2% of the loan amount
Interest0.5% – 2% per month (6–24% per year)
Valuation Fee£300 – £1,000+ (depends on property value)
Legal Fees£500 – £2,000+ (yours and the lender’s)
Exit Fee1% – 2% of the loan amount
Broker Fee1% – 3% of the loan (if using a broker)
Admin/Processing Fees£100 – £500+
Telegraphic Transfer Fee£25 – £50
Extension FeesVaries

Fees not directly involved with the bridging loan transaction may include fees for accountants, architects, builders, designers and more.

Bridging Loan Fees Example:

Based on borrowing £500,000 over 6 months:

Arrangement Fee – (1–2%) £5,000 – £10,000

Valuation Fee – £700 – £1,000 (depends on property type/value)

Legal Fees – £1,500 – £3,000 (covers both parties)

Interest (6 months @ 1%/mo) – £30,000

Broker Fee (up to 1.5%) – up to £7,500

Exit Fee (1%) – £5,000

Total Estimated Cost: £49,700 – £56,500+

What Are The Average Fees For Bridging Loans?

The average interest rate charged for bridging loans is 0.5%-2% per month and this rate varies between lenders and their criteria. Other factors include:

  • The type of property and bridging loan (residential, commercial, second charge)
  • The risk appetite of the lender
  • The risk of the project
  • The exit strategy
  • The track record and experience of the borrower
  • The loan duration

How Is The Interest Repaid On a Bridging Loan?

Serviced Interest

You pay monthly. Early repayment usually means you stop paying — no penalty unless there’s a minimum term.

Rolled-Up Interest

All interest is paid at the end. Some lenders may still enforce a minimum term, so you pay interest for that full period even if you repay early.

Retained Interest

Lender assumes a set loan period (e.g. 6 months) and holds back interest upfront.

If you repay early, you may not get a refund on unused months — this acts like a soft early repayment cost.

difference between bridging and development finance

How Can I Reduce The Fees On My Bridging Loan?

Use a broker to get the best deal – A bridging loan broker will have access to a number of lenders and options – and based on your requirements and criteria, they will be able to offer you the most competitive rates and terms.

You may find that one lender is able to charge you significantly less interest than another, even though you have the same requirements, but just because they have better risk appetite. 

Note that some lenders charge only 1% as an arrangement fee and some charge as much as 3%. Knowing upfront how much the broker charges and deciding to proceed or not, could save you thousands on broker fees.

Type of property – The interest is likely to be higher for commercial properties (compared to residential properties) because residential properties are seen as being more favourable and there being a greater demand.

Use additional security – If you have equity in other properties, you can use this towards your bridging loan – and this can help you reduce your deposit amount and access more favourable rates.

Have a good track record and exit strategy – Lenders certainly want to work with more experienced and successful borrowers – and having a proper track record and clear and well articulated exit strategy will make your application look more attractive and give you access to better rates.

What Are The Fees if You Default On Your Bridging Loan?

If you default on your bridging loan and miss the repayment deadline as agreed, you will be charged a default fee of 1% – 3% per month as an interest and a late payment (such as £500 or £1,000) may apply.

The default fee may continue each month until the loan is repaid.

The lender might undertake a process to review your loan and consider some repayment options – and this may incur an admin or review fee of £500-£1,000.

Further fees may be incurred if the loan goes further into arrears, including legal fees, repossession fees, receivership fees and more.

There are several options if you are struggling to repay your bridging loan or there is a delay in repayment. This is very common, especially if building work is taking longer than expected or there have been any legal or construction issues with the property. 

Speaking to the lender may offer options such as loan extensions, refinancing or rebridging a bridging loan to give yourself more time.

Are There Early Exit Fees With Bridging Loans?

Yes, some lenders will charge you an early exit fee if you decide to exit the loan within a certain timeframe e.g 1-3 months. This fee varies, and might be 1% to 2% of the entire loan amount.

This fee does depend on the lender, with some providers not charging any early redemption fees at all.

If the loan is a 12-24 month loan, the lender may need to be able to earn a small amount of interest to at least cover the cost of underwriting and funding the loan. 

The early exit fees will be clearly stated in the loan agreement that you sign with the lender and you can use this as a reference. 

How Fast Can I Get a Bridging Loan?

Bridging loans will typically be funded in 3-4 weeks from the start of an application, but there are several cases where applications have been funded in as little as 5-7 days.

Bridging loans offer an alternative form of fast funding, consisting of private lenders and investors who can offer quick funding solutions to help customers purchase property under a tight deadline.

By removing the hurdles and long applications associated with mortgages and high street banks, bridging lenders and providers can often take a more personal view on an application and fund the loan directly in a matter of days or weeks.

There are several ways to speed up the process, such as knowing the lender’s criteria before you find the property, speaking to a bridging loan broker and having all the relevant paperwork ready.

Bridging Loan Speed Breakdown:

StageTime Estimate
Initial enquiry & decisionSame day – 1 day
Property valuation1 – 3 days
Legal work & underwriting3 – 10 days
Funds releasedWithin 24 hours of approval


How Long Does It Take To Get a Decision in Principle For a Bridging Loan?

A decision in principle, which offers indicative terms on a quick bridging loan, can usually take 24-48 hours to be provided by a lender. Sometimes, this can be offered in just a few hours. 

The loan decision will always be subject to further checks, documents and a strong exit strategy – and the terms may be adjusted in line with this.

How Long Does Underwriting Take For a Bridging Loan?

Underwriting for a bridging loan can take a few days or weeks depending on the complexity and additional information required by the lender. Underwriting refers to the decision process made by the lender to analyse risk and carry out all the sufficient checks to make a loan decision. The underwriter may decide to approve or decline a loan, or adjust the terms in line with their risk profile.

How Long Does It Take For Funds To Be Released For Bridging Loans?

Once a bridging loan has been fully approved, it can take 24 hours to 3 working days for the funds to be released for large bridging loans, often depending on the size of the loan.

See Also

How do bridging loans work

Is a bridging loan right for me?

Am I eligible for a bridging loan?

Why Would I Need a Bridging Loan So Fast?

Bridging loans are best used to complete fast on property deals. A bridging loan facility allows you to become cash buyer and therefore complete immediately on a property, helping you to avoid property chains and lengthy mortgage delays.

Popular amongst property developers and investors, the speed of funds is often a priority, whether it is to break a property chain, grow their portfolio or secure the property before another buyer does.

Popular reasons for needing a fast bridging loans include:

  • Buying property at an auction (see auction finance loans)
  • Buy a property below market price i.e distressed, off market property
  • Breaking a property chain
  • Growing a property portfolio  
  • Buying an unmortgageable property
  • Avoiding repossession of an existing property to pay off mortgage arrears
  • Raise capital for a business opportunity
  • Short-term cash flow issues – e.g waiting for large invoices to be paid
  • Important refurbishment or renovations 
  • Pay probate or inheritance tax liabilities

What Can I Do To Get a Quick Bridging Loan?

Speak to a broker – A broker has access to rates and terms from multiple lenders and will be able to assist to help you find the best fit. This includes finding the most competitive rates, best LTV ratio and fastest funding. 

Know the terms beforehand – It is very useful to know the bridging loan application process and understanding what brokers and lenders require to give you an initial decision in principle and to progress with your application. 

A more seasoned property developer and bridging loan customer knows that the second they find a desirable property, they can move quickly with all the right information and documents – and they have an idea of the terms and rates so they can determine if it will be commercially viable. You want to get to the point that if you find the best property opportunity, you know which lender you want to work with, the criteria they offer and you can proceed immediately. 

Unregulated may be faster – Unregulated bridging loans may offer decisions faster because lenders are more independent and not bound by strict FCA procedures.

Have a strong exit strategy and business plan – A strong exit strategy for your project and a business plan with financials and forecasts is essential to show to a lender to speed up the application. If you need the right format or an expert to put this together for you, you can ask a broker or lender beforehand for advice.

Have a deposit ready – You will typically require a deposit of at least 25% for a bridge finance loan and having this ready in cash or through equity in another property is vital to speed up the application. If you have found an exciting property, you ideally don’t want to take weeks finding the deposit elsewhere. 

Get your documents ready – You will always need to show a broker and lender your financial records, statements, proof of funds and deposit – so having this ready straight away will certainly speed up your application.

Have a surveyor and solicitor ready – The turnaround of your bridging loan application will depend heavily on your partners such as your surveyor to do a valuation and report and your solicitor to process the legal documentation.

With some partners tied up on other projects, you want to avoid waiting several weeks for a response. This may also include any other partners you work with, such as getting assistance and quotes from accountants, architects and your builders. 

Be responsive – Being available by email and phone with the broker and lender will help you progress your application, responding to any questions or document requests.

What Can Slow Down My Bridging Loan Application?

Property purchases can be unpredictable and there are factors that can slow things down. Specifically, any legal complications with the property such as title issues or leasehold agreements – and the response to these may depend on the availability of your solicitor. Hence, having good partners such as your solicitors to be able to process and respond to issues quickly is essential.

Some property types have more requirements than others, with residential property being a faster turnaround than commercial. Your ability to maximise the property’s value may be subject to planning permission, building regulations or being on green belt land – so having prior knowledge here is useful. 

Finally, not having a deposit will certainly slow you down. You need to understand exactly what you can afford to borrow and have a deposit ready to go. When you find that elusive property, you want to be able to contact your broker or lender and your solicitor and everything is lined up so you can proceed as quickly as possible.

How Much Deposit Do You Need For a Bridging Loan?

The typical deposit you need for a bridging loan is 25% of the property’s value, based on borrowing a maximum loan-to-value (LTV) of 75%, with some bridging lenders willing to offer 80% or 85% LTV and therefore will accept a deposit of 15% or 20% of the property’s asking price.

Example: if you are looking to purchase a property for £500,000 at 75% LTV, you will need to put down a deposit of 25% which is £125,000 and the lender may be able to lend you the remaining 75% at £375,000.

Importantly, your deposit may consist of a cash deposit, investment or existing property value – so if you own a property with equity, this equity can be used as a deposit. 

Bridging finance is popular for property developers and investors that may not have access to immediate cash and have their capital tied up in existing properties. With small deposits and the option to use existing equity in other properties, bridging offers a scalable way to grow a portfolio.

What is The Minimum Deposit Needed For a Bridging Loan?

The minimum deposit for a bridging loan is usually 25%-40% of the property’s value, but this can vary between lenders.

Type of Bridging LoanTypical LTVMinimum Deposit / Equity Required
Residential bridging loansUp to 75%25%
Commercial bridging loans60% – 70%30% – 40%
Second charge bridging loans60% – 65%35% – 40%+

What Are The Minimum Deposits For a Residential Bridging Loan?

Borrowing against flats and homes where people live is considered less risky because there is a strong market and demand for these properties. A minimum deposit of 25% is usually required, but you may require a deposit of 30% or 40% depending on your project and the proposed risks.

What Are The Minimum Deposits For a Commercial Bridging Loan?

The minimum deposit for a commercial bridging loan is 30%-40% because these are typically seen as riskier than residential properties. Commercial properties such as offices, warehouses and shops are often harder to sell than residential properties and some lenders argue that there is less demand and a smaller market for these kinds of properties – hence a higher deposit is required to manage the risk for the lender.

What Is The Minimum Deposit For Second Charge Bridging Loan?

The minimum deposit for a second charge bridging loan is usually around 35%-40% of the property’s value depending on various factors including affordability, project growth, the borrower’s background and more.

This type of loan is the second priority in terms of payments against a property and often sits behind an existing mortgage. Being further down the chain, there must be enough equity in the property to be eligible for a second charge and therefore the equity or deposit must be around 35%-40% of the property’s value.

need a salary to get a bridging loan

What Factors Impact The Deposit For a Bridging Loan?

There are numerous factors that impact the deposit required for a bridging loan to be approved and funded, including:

The lender’s criteria – Some lenders will have a different criteria and risk appetite, especially when the market is confident or declining. When working with a bridging loan broker, it is common to receive different terms and offers, since each lender has a different risk profile.

Borrower’s background – A seasoned and regular borrower with an excellent track record with developing property may get preferential rates and loan-to-value options, compared to someone with less experienced or a negative track record. Other factors such as the size of their company, credit score and a strong exit strategy.

Project and asset value – The complexity of the project and the potential growth opportunity of the property will be considered by the lender when offering loan terms and minimum deposit amounts. Equally, having equity in another property can be used as a deposit. Hence, the value of this equity and its current status may be a contributing factor.

Loan terms – Your proposed loan terms by the lender will also influence deposit amounts. Some lower deposits may be offered but come with higher monthly fees. Loan duration may also play a role in determining the deposit amount. Mezzanine finance and senior stretch loans may allow you to borrow large sums and make a lower deposit, giving up some equity in the project.

Security – Some lenders will accept additional security for any other assets or properties you own, which could help you get a bridging loan with a low deposit.

Can I Get a Bridging Loan With No Deposit?

No, typically, bridging loans will require you to make a deposit, usually starting from 25%.

However, in some circumstances, you may be able to get a bridging loan with no deposit if:

  • You have equity in other properties that can be used towards a new bridging loan
  • You offer multiple properties as collateral to cover the full loan amount
  • You have a strong exit strategy and an experienced track record

See also: Do you need to have a salary to get a bridging loan in the UK?

What is The Maximum LTV I Can Borrow For a Bridging Loan?

The maximum LTV you can borrow for a bridging loan is typically 70%-75% for residential properties. 

Some lenders may accept 80%, 85% or 90% in particular circumstances, including using our properties to cross charge or add security, having a strong track record or using an added layer of finance such as mezzanine finance.

What is the Maximum LTV For a Bridging Loan?

The maximum loan-to-value (LTV) that can be offered by bridging lenders in the UK is around 70%-75%, with the possibility to borrow 80% or 85% LTV in very particular cases. 

The loan-to-value rate offered is based on various factors including:

    • Whether the lender offers regulated or unregulated bridging

    • The lender’s company policies and risk appetite

    • The borrower’s background and experience of previous deals

    • Business plan, forecast and exit strategy

To be eligible for a 70% LTV, the borrower will be required to provide a deposit of at least 30% of the overall property value. 

70% LTV Bridging Loan Example:

A customer wants to borrow £1 million to purchase a residential home which they plan to refurbish and rent out to tenants once completed. The borrower must place a deposit of 30% at £300,000 and the bridging lender has agreed to facilitate the remaining balance of £700,000 at 70% LTV for 18 months.

What Determines The Loan-To-Value For a Bridging Loan?

Regulated vs Unregulated Bridging Finance

Regulated bridging loans will typically offer 65%-75% of the entire property value and may be more restrictive because they are able to lend against someone’s primary residence. Regulated bridging lenders are restricted to this maximum loan-to-value because they are regulated by the Financial Conduct Authority. 

Unregulated bridging loans are available from challenger banks, private lenders and firms and might be more flexible to offer up to 75% LTV and 80% in rare cases. 

See our guide on the difference between regulated and unregulated bridging loans.

Type of Property, its Location and Condition

Bridging lenders tend to favour residential properties when it comes to loan-to-values and borrower amounts, because they consider them to be lower-risk assets, compared to commercial properties. For instance, semi-commercial properties are deemed to be higher risk and may only offer maximum loan-to-value ratios of 50% or 60%. 

Similarly, purchasing a property in a good location, in a good state and with potential growth may be more favourable to lenders who seek to recover their funds.

residential properties

Lender’s Risk Appetite

Some lenders will experience different levels of risk depending on the time of year you apply and whether they have recently accessed a funding line. 

Using a bridging loan broker can help you access a range of offers from different lenders – and the loan-to-value ratios they offer may vary due to different lender appetites. 

Your Deposit

Borrowers must be able to provide a deposit of 25% of the property value to be eligible for maximum LTVs of 75%. 

If you only have a deposit of 5% or 10%, you will unlikely be eligible to access a 90% or 95% loan-to-value.

If a borrower needs to improve their deposit, they can look at bringing in external investors.

Clear Exit Strategy and Experience

Better loan-to-value ratios may be available to borrowers and developers with clear business plans, exit strategy and experience in successfully completing and repaying bridging loans on time. A repeat customer with a specific bridging lender may be able to access better rates on return.

Can I Borrow 80%, 90% or 100% LTV Through a Bridging Loan?

Most bridging loan lenders will not extend their loan-to-value ratios to more than 75% LTV. Exceptions may apply to offer 80% to 90% depending on the individual borrower’s track record and their relationship with the lender.

In some cases, the bridging provider might consider a higher LTV if offered additional security, such as taking a charge on another property, charging higher rates, guarantees or seeing proof of funds.

What if I Need to Borrow More Than 70% or 75% LTV For My Bridging Loan?

For those looking to top up their existing bridging loan, they may consider speaking to a mezzanine finance lender to add a further layer of debt. This is an unsecured loan and involves the lender offering debt and taking some equity in the overall project.

Some borrowers may consider using personal loans and putting this toward their project.

Other options include sourcing investments from other parties, speaking with private investors or doing joint ventures.

How To Rebridge a Bridging Loan

A rebridge or rebridging of a bridging loan is when a borrower refinances their existing bridging loan with a completely new loan on the same property, whereby the duration of the loan is extended and the terms are more favourable to their current situation.

KP Finance offers expert advice and quick decisions on everything relating to bridging. Speak to one of our team members on 0203 488 1128 or email us at enquiries@kpfinance.co.uk

For any developers or investors that are in the middle of a large refurbishment or are awaiting a sale of their property to repay their bridging loan, the use of a rebridge allows them to get a completely new loan and extend their repayment terms before a sale takes place or more funding becomes available.

With a bridging loan usually having a maximum duration of 18-24 months, the loan may be at risk of default unless additional funding is arranged.

Whilst a rebridge of a bridging loan is common, typically the terms of a rebridge are less favourable, because the borrower has not met their original bridging loan repayment on time. Hence, the interest rates for a rebridge may be higher than the initial loan and the borrower may not be approved by their existing lender and have to seek an alternate provider.

To rebridge a bridging loan, you can apply directly with a lender or bridging loans broker.

Rebridge a Bridging Loan Repayment Example:

Original bridging loan:

Loan amount: £1 million

LTV: 70%

Term: 12 months

Interest rate: 0.85%

Monthly interest: £8,500

12 month interest: £102,000

Full repayment amount: £1,102,000

Rebridge:

Loan amount: £1 million

LTV: 75%

Term: 12 months

Interest rate: 1.0%

Monthly interest: £10,000

12 month interest: £120,000

Full repayment amount: £1,120,000

What Scenarios Would You Need To Rebridge a Bridging Loan?

Awaiting sale of the property – Developers and investors will use bridging finance and carry out renovation work to maximise the value of the residential or commercial property. When the project is complete, it might be sold on the open market for the best price and once sold, the bridging loan will be repaid in full. 

Although the end of the loan term may be approaching, the borrower might not have received an offer for the property yet, is awaiting the best offer possible or the sale is taking several months due to mortgage delays and chains. In which case, a rebridge to extend the loan might be a sensible option.

Project is overrunning – If you have used a bridging loan to purchase a property, are carrying out refurbishment work and this is running longer than expected, you may not be able to repay your original bridging loan on time and need to rebridge. 

Depending on the status of the project, it is common for building work to run longer than expected, especially if any issues arise with builders, contractors, asbestos, subsidence, flooding and fires – you may need longer than the allocated 18 or 24 months to complete the required work.

Get access to more capital – If the borrower needs more capital toward to finance their building or construction, a rebridge may allow them to borrow an additional 10% or 20% if their current LTV is 50% or 60%, since the lender is willing to go to a maximum of 70% or 75% LTV.

Some bridging lenders are able to offer 80% or 85% LTV in certain scenarios as the maximum LTV value, but this will be reflected in higher interest rates and possibly giving up some equity in the overall project.

Avoid arrears and repossession – If you are approaching the end of your existing bridging loan and do not have a sale or option to pay it back in full, the loan will be put into arrears. This will incur late fees, default charges and interest will continue to accrue on the loan. Being in arrears may also negatively impact the borrower’s credit score.

Rebridging a bridging loan may allow the borrower to extend their loan for a further 12 or 24 months and avoid default and possible repossession of the property if the loan is in arrears for long enough.

Awaiting more long-term finance: Developers may be waiting for longer-term finance to come through a mortgage, sale or outside investment, and this might be delayed. If they are waiting specifically for another financial arrangement to complete, they may look to rebridge for a further 6 months or longer.

Awaiting a buy-to-let mortgage – For developers that have upgraded a property for the purpose of renting it out to tenants, they might be awaiting approval and confirmation of a buy-to-let mortgage.

 

KP Finance offers expert advice and quick decisions on everything relating to bridging. Speak to one of our team members on 0203 488 1128 or email us at enquiries@kpfinance.co.uk

 

When is a Rebridge of a Bridging Loan Not a Good Idea?

There are certain scenarios when rebridging a bridging loan is not sensible for both the borrower and the lender, including:

No clear exit strategy – Some bridging loans are classed as ‘open’ with no clear exit strategy, but for many lenders this is the method of how the loan will be paid back. If the borrower is unsure what to do with their bridging loan or property and has no clear vision or repayment strategy, they should possibly seek alternate arrangements rather than committing to another bridging loan which incurs charges and risk of repossession if not repaid.

Financial troubles – If the borrower is suffering financial trouble and has lost significant income from carrying out construction work or a loss of investment, using a bridging loan which ties them down to higher rates may not be recommended. It might be more sensible to sell the property and recover any losses or speak to a professional for financial advice.

Property value has decreased – If the project has experienced unexpected issues and is in worse condition, it might be better for the borrower to sell the property rather than trying to rescue it. Lack of planning permission, fires, floods or squatters can make keeping a property more troublesome and taking out a new bridging loan may not be sensible.

Will Bridging Loan Terms Be More Expensive When You Rebridge?

Yes, a rebridge often comes with higher interest rates. This is because the lender classes this as riskier because the borrower has not completed and repaid their original loan. For this reason, the original lender may not want to take on the loan again and borrowers will have to apply for funding with alternative providers.

Other factors will contribute to the rate you are charged including:

    • The current loan-to-value (LTV)

    • Business plans and forecasts

    • Condition of the property

    • Timeframe and exit strategy

    • Reason for needing to rebridge

Importantly, borrowers will also be subject to other additional fees that come with taking out a bridging loan such as survey and valuation fees, solicitor fees, lender arrangement and broker fees, if applicable. 

Can I Ask My Existing Bridging Lender For an Extension?

Yes, you can ask your current bridging lender to give you an extension for 3 or 6 months, or longer. If you have a valid reason for extending and can back this up with clear financials, business plan and exit strategy, it is something that they may be willing to consider. Note that you may still be subject to extension fees, admin fees and be moved to a higher interest rate.

Do You Need to Have a Salary to Get a Bridging Loan in the UK?

No, you do not necessarily need to have a salary to be approved for a bridging loan in the UK. Bridging lenders work with mostly property developers, investors and people that are self-employed and they understand that their applicant’s income might be based on the sale of a property or rental income.

What is a Bridging Loan and Why Might I Not Need a Salary For One?

A bridging loan or bridging finance is a popular source of funding to complete a property or transaction within a tight deadline. Available from private firms and investors, these types of loans are different to those from traditional banks and mortgage providers, with the ability to make fast decisions and complete funding in days or weeks, rather than several months.

Lenders are willing to take a more subjective view on their eligibility criteria and provide more personalised options and structured terms for the borrower.

Having a salary, job or income may not be essential for a bridging loan application to be approved since the property is being used as security and this is valuable to the lender. But understanding the borrower’s motives, plans, exit strategy and long term goals is essential for the lender to determine whether or not they will be able to pay back their loan. 

The Difference in Criteria For Regulated and Unregulated Bridging Loans

If the bridging loan falls under regulated activity and is secured against your primary residence, this may be subject to income and affordability checks, because there are monthly interest repayments involved, as deemed suitable by the Financial Conduct Authority.

If your bridging loan falls under unregulated activity (see unregulated bridging loans), having a salary may not be necessary for approval because it is only repaid upon exit. Factors such as your exit strategy, having equity in the property, receiving rental income and a strong business plan may be sufficient.

CriteriaRegulated Bridging Loan (For Residential Use – FCA Regulated)Unregulated Bridging Loan (For Investment/Business Use)
Do you need a salary?Preferred but not always requiredNo, but other financial factors are considered
Main Focus for ApprovalAffordability & exit strategyExit strategy (e.g., property sale or refinancing)
Lender Income AssessmentYes, income checks are typically requiredNo formal income checks in most cases
Alternative Income ConsideredYes, rental income, pensions, or savings can helpYes, rental income, business profits, or assets can be used
Credit History ImportanceImportant for affordability checksImportant but less critical than the exit strategy
Exit Strategy Required?Yes, to show how the loan will be repaidYes, usually the primary focus for approval
Who Typically Uses It?Homeowners needing short-term financeProperty investors, developers, business owners
FCA RegulationYes, FCA-regulated for consumer protectionNo FCA regulation, as it’s for commercial use

See also the difference between regulated and unregulated bridging loans.

What Factors Will Bridging Lenders Look At If I Do Not Have a Salary?

Exit Strategy – The exit strategy may be the most important thing that a bridging lender considers if you do not have a regular income. Whether it is a sale of the property or securing long-term finance, being able to demonstrate this clearly through business plans, cost-analysis and forecasts will be necessary when you apply.

Rental Income – Showing proof of current rental income that you are earning from other properties may be used in lieu of a regular income.

Equity in Property – The more equity you have or assets that you own, the less risk there is for the lender and the more confidence they have that they may be able to recover any loss of funds.

Other Sources of Income – You can use other income sources such as investments, pensions or business earnings or even proof of future earnings from a client to support your application.

Credit Score – Some lenders may run a credit check to get an indication of your credit history. Whilst not all lenders do this, they may be looking out especially for things like IVAs, CCJs and bankruptcy. 

Can I Get a Bridging Loan Without an Income?

Yes, you can get a bridging loan without a regular income. Unlike traditional mortgages, which based their decision on your salary and affordability, bridging loans are primarily based on your exit strategy and how you plan to repay the loan.

If you do not have a salary, showing other assets, strong credit history, or a clear exit strategy can improve your chances of approval.

Can I Get a Bridging Loan if I am Unemployed?

Yes, you can still get a bridging loan if you are unemployed, but you will need to demonstrate how you will repay the loan. 

Since bridging loans are secured against property, lenders are more concerned about the value of your assets and your ability to repay rather than your employment status. 

Lenders are used to working with people that are solo-entrepreneurs, developers or self-employed and if you can show that you have a strong exit strategy to buy and sell a property, carry out refurbishments or rent it out to tenants, you can put your case forward effectively. 

What Happens if You Cannot Repay Your Bridging Loan?

If you cannot repay your bridging loan, you will likely incur late fees and penalties – and in severe cases the lender could take you to court, appoint liquidators or repossess your property to recover their funds.

In most cases, if the sale of the property or the building work is delayed, the lender will just charge you additional interest for a few months until the project is complete. Otherwise the lender might take more drastic measures to recover their debts.

The implications of non-repayment include:

    • Late fee (varies between lenders)

    • Added interest (around 1% per month)

    • Default interest rates (around 1%-2% per month)

    • Account review fee

    • Negative impact to credit score

    • Refinancing of loan under new terms

    • Court action (if applicable)

    • Liquidation (if applicable)

    • Repossession of property (if applicable)

What Happens When You Miss Your Bridging Loan Repayment?

The bridging loan will be due on a certain date and this is usually repaid one lump sum, or through refinancing of a new loan or mortgage under different terms.

Added fees –  if the project is not yet complete, due to ongoing building work or a delayed purchase, your loan will go into arrears and you will incur a late fee and default interest rate – and the loan will continue to accrue the same monthly interest.

In most scenarios, the borrower will pay a few extra months of interest and default interest rates and then repay the loan in full upon exit.

The lender will always try to work with the borrower – Charging extra interest is more practical for the lender than going to court or through the process of repossession. 

Impact to your credit score – The default will typically be noted on your credit report and this will make your overall credit score fall. 

Account review – Some bridging lenders may carry out an official account review, looking closely at the latest value of the property, with new renovations and upgrades in consideration. The lender may charge an undisclosed fee for this service which is obligated in the contract. The lender may adjust the terms of the loan accordingly to make it more affordable and likely to be repaid.

Liquidation and repossession – In more severe cases, if the entire project and overall deal has gone completely south, the lender may be forced to liquidate the company or consider repossession of the property to recover their losses.

Why Might Your Bridging Loan Overrun? 

With bridging loans typically lasting from 12-24 months, the interest is usually rolled up and repaid in full upon exit. 

However, bridging loans are often used for buying and fixing up properties. If you’re counting on selling the property to repay the loan or your construction work is delayed, it can be difficult to pay back the loan on the exact repayment date. Certainly, if you are undertaking some high value refurbishments or have had delays due to planning permissions, these are things that can set back the process by a couple of months (or years).

Other factors that might make the bridging loan go over term include having:

    • Personal issues, such as bereavements in the family or divorces

    • Falling outs or financial issues with builders, investors, solicitors and contractors

    • Costs overrun and the project runs out of funds

What Are The Outcomes For Missing Repayment For a Regulated and Unregulated Bridging Loan?

The outcomes for defaulting will be slightly different with regulated and unregulated bridging loans.

With regulated bridging loans, there is more of a process to protect the borrower and the lender will run through steps to understand your current position and help you repay within a reasonable timeframe. Whilst default fees will still apply, the regulated lender might talk to you and understand your project and consider other options such as refinancing and selling the property in its current state.

With unregulated bridging loans, the lender can choose how they wish to recover their debt. Typical default fees and late penalties will apply, but they might wish to take more remedial action in the form of calling in the loan (requesting full repayment), appointing liquidators or demanding repossession.

It is important to know that repossession is costly to the lender and a timely process – and it is only approved after a court hearing. In most situations, the lender will prefer to charge a few months of additional interest and hope that the loan is exited naturally.

What Can You Do To Avoid Defaulting On a Bridging Loan?

Speaking to the lender as early as possible is always recommended – and by doing so, the lender may be able to assist you and come up with a flexible and affordable arrangement. By waiting too long or until the loan’s maturity, you may be left with fewer options. Similarly, ignoring any communication by email or phone with the lender may cause the late fees and court action to escalate when speaking openly can resolve this quicker.

If your bridging loan is repaid in full upon exit, taking measures to speed this up can be helpful. If the exit is based on the sale of your property, then making the price more attractive for buyers or higher good agents could help move this along quicker. You may also consider during the planning phase to give yourself around 3 months to sell the property once it is complete. To complete all the renovations and sell in the same month might be too optimistic.

Finally, the role of refinancing or rebridging a bridge is extremely common and popular. This allows you to extend the terms of your existing loan based on current market rates and today’s value of your property, which might have changed. Depending on the condition and status of your property and its development, the terms under refinancing may not be as favourable as before, but they may help you to avoid any penalties or remedial action.

Is a Bridging Loan Right For Me?

Bridging loans offer a fast way to purchase properties by helping borrowers to become cash buyers. 

Rather than waiting a long time for a mortgage to be approved or for the delays that come with property chains, a bridging loan can be approved and funded in around 2 to 4 weeks. 

This makes bridging finance in the UK popular for people who want to purchase a home under a tight deadline or for ambitious property developers who are looking to actively grow their portfolios. 

Understand The Risks Of Bridging Loans

Bridging loans come with important risks. Due to their fast turnaround and short term nature, the rates charged are more expensive than standard mortgages and if you struggle to repay your loan, you can be at risk of late fees and your property being repossessed by the lender. 

For context, whilst a regular interest rate for bridging finance is around 1%, a default interest rate is around 2% per month and a late fee and account review fee may also apply. Any missed repayments will also have a negative impact on your credit score.

In the worst case scenario, if you are unable to repay your loan, you could risk losing the property through repossession and this could be your original primary residence or investment that you have put a lot of work into.

When Are Bridging Loans Used?

To move home – Homeowners may use bridging loans to purchase a new home if they have been unable to sell their own. Rather than continue to wait for their home to be sold, they can use the funds from a bridging loan to purchase their desired property. This is common in scenarios when the property they want is very attractive and they could risk losing it. The homeowner has the duration of the bridging loan to sell their house (12-24 months) and once it is sold, it automatically clears the interest and repayment for the bridging loan.

To buy properties at auction – When buying a property at an auction, both residential and commercial, 10% of the funds are required on the day you win the bid and a further 90% of the property’s value is required within 28 days. A bridging loan (also known as auction finance) can help you come up with the remaining funds within the required timeframe. 

To pay for renovations – Bridging finance can help pay for light or heavy refurbishments and upgrades to a property. This is often in tandem with purchasing a new property for it to be sold or rented out to tenants.

To grow a property portfolio – For property developers looking to grow their portfolios, bridging finance allows them to acquire other properties with small deposits at 75% LTV. This is practical when you have capital tied up in other projects but have ambitions to keep building.

To break property chains – If you are purchasing a property and are stuck in a very long chain, the use of a bridging loan helps you to become a cash buyer and move quickly on a property sale. When there is a long chain, owners are usually relying on the equity from the sale of their property to purchase the next property – but a bridging loan can give you the same amount upfront. You just need to be able to sell your own property within the 12-24 month timeline.

Is a Bridging Loan Right For You? The Pros and Cons

Pros:

Fast – Bridging finance deals are regularly funded in under one month, which is a vast improvement to a mortgage which usually takes several months. Bridging loan lenders can offer indicative terms on the day and decision in principles in 48 hours.

Flexible – Every property deal and project is unique and bridging loans address this with very specific and flexible terms when it comes to drawdowns and repayments.

Large amounts – Bridging loans can start from £50,000 to several million and customers can access 75% or 80% of their property’s value. 

All credit considered – Those with adverse credit histories may still be considered if they have an attractive property or opportunity.

Cons:

High interest – Due to the speedy nature and short term timeframe, the interest rates for bridging loans are around 1% per month, compared to a mortgage which currently is around 5% per year.

Deadlines can be pressurising – Using bridging to refurbish and add value to a property is effective, but if there are building delays or costs are mounting up, this becomes a very pressurised situation when the end of your loan term is looming and full repayment is required. 

Late fees and repossession – Any late repayments incur late charges, such as default interest, penalties, account review fees, potential court action and also put the property at risk of repossession.

Is a Bridging Loan Right For Moving Home?

Yes, bridging loans are a viable option if you are moving home and want to secure another property very fast. If you need to complete it in 2 weeks or are breaking a chain, bridging can be a practical option.

In fact, being a cash buyer is the fastest way to purchase a property and bridging finance turns customers into cash buyers.

But unless you have a strict deadline or are stuck in a property chain, bridging is a riskier option than borrowing through a mortgage. 

When using bridging loans, you are essentially using your existing home or property as collateral.

If your initial property sells quickly, then you will not incur too much interest. 

But if your property continues to be on the market for a long time, you may be stuck taking a very low offer for your house or if it is unsold, you risk incurring late fees from the lender and even repossession as they attempt to recover their funds.

Is a Bridging Loan Right For Property Investments?

A bridging loan in the UK can be a suitable option for property developments and investments, particularly when speed and flexibility are crucial.

This source of finance is often used by investors who need to secure a property quickly, such as purchasing at auction or closing a deal within a tight deadline. 

They are also commonly employed for financing property renovations or developments, allowing investors to add value before selling or refinancing. 

Additionally, bridging loans can help bridge the gap when there is a delay in the sale of an existing property, helping the investor to proceed with a new purchase without waiting for the previous sale to complete. 

Despite their benefits, bridging loans come with higher interest rates and fees compared to traditional mortgages and are intended for short-term use. 

A clear exit strategy and management of costs and building work is essential to ensure the loan is repaid on time. Hence they are most effective for investors with a well-defined plan and the means to cover the associated costs.

Are Bridging Loans More Expensive Than Mortgages?

Yes, on average bridging loans are more expensive than mortgages, charging 1% per month, compared to 5% per annum. 

Additionally, bridging loans may include various fees such as arrangement fees, exit fees and broker fees which you may not pay if you apply for a mortgage directly with your bank.

Unlike mortgages, which are designed for long-term repayment over 5 to 25 years, bridging loans are intended for short-term use, usually lasting between 3 to 24 months maximum.

The higher costs are balanced by the speed and convenience they provide, making them a viable option for investors or buyers who need quick access to funds or are dealing with unique financial situations that standard mortgages may not accommodate.

Should You Choose a Bridging Loan?

A bridging loan can be suitable for you if you need to act quickly on a property or an opportunity. Of course, mortgages are a lot more affordable, but if it works out that being approved for a mortgage will take too long or you are stuck in a long property chain, a bridging loan can serve a very useful purpose.

For property developers, the popularity of bridging loans in the last decade has offered a very flexible and scalable way to build property portfolios at speed.

However, it is just essential that you have a strong exit plan whether you are a homeowner or a property developer. As a homeowner, you can get approved for a bridging loan and purchase your onward. You just have to be certain that your original house will sell within the desired timeframe or you could be subject to some late fees, penalties and repossession of your original family home.

For property developers, you need to have a clear understanding of all the costs involved with purchasing and renovating your property. Any building delays or overrunning of costs could prove hugely costly down the line and also incur late fees and risk of repossession. Taking time to plan the financials and forecasts with your builders and professionals would be a worth exercise. 

What Are The Alternatives To Bridging Loans?

Depending on the purpose of your loan, there are some very viable alternatives. 

A mortgage is a more affordable option to purchase a property and there are options to remortgage after a few years to get better rates.

If you are looking to make home renovations, you could look at a second charge loan, personal loan or remortgage to release equity.

Speaking to investors, family or friends could also provide an important injection of funds if you were in desperate need of funds.

Making sure you understand all the risks and implications that come with bridging loans is very important before you proceed.

Am I Eligible For a Bridging Loan?

The eligibility of a bridging loan is based on your own personal circumstances and also the property you wish to purchase, your plans for it and its potential growth value.

Some essential things you need to be eligible for a bridging loan are:

  • Identification and address
  • Financial statements
  • Details of the property and the opportunity
  • Clear overview of costs
  • Clear exit strategy

Identification and Address

  • Proof of identity, such as a passport and driver’s license
  • Proof of address such as recent utility bill 

Financial Statements (may include)

  • Bank statements last 3 months (individual or business)
  • Proof of income
  • Details of outstanding mortgage
  • Evidence of assets and liabilities
  • Recent business accounts

Property Details

  • Details of the property you plan to buy or develop e.g address, written offers
  • Details of auction purchase (if applicable)
  • Details of the property you plan to sell
  • Details of any building work i.e costs, timeframes
  • A valuation of the property you are buying
  • Purchase price and property value
  • Tenure

Types of Properties That Can Be Eligible

  • Houses
  • Flats
  • Hotels
  • Bungalows
  • Student accommodation
  • Offices
  • Depots
  • Factories
  • Warehouses
  • Garages
  • Care homes
  • AirBnBs
  • Hotels
  • Airspace
  • Farms
  • Shopping centres
  • Leisure centres
  • Hangers

Exit Strategy

  • Details of renovating the property i.e expected cost, timeframe
  • Details of selling the property  i.e expected value, timeframe
  • Plans for refinancing i.e longer term mortgage, buy to let
  • Details of your property portfolio and prior experience
  • Clear plans with costings, forecasts and financials 

Useful Tips To Be Approved For a Bridging Loan

  • Unregulated bridging loans may offer more flexibility for people with adverse credit histories or those who have less experience in property development
  • Your chances of approval could be higher if your property has great potential value once refurbished or because of its location and demand
  • Having all the details about the property, your financial statements and exit strategy ready will help get your loan approved and funded as quickly as possible

What is a Bridging Loan and How is It Different To a Traditional Loan?

A bridging loan is a type of short term loan that is commonly used to purchase properties under a tight deadline. 

With loans lasting around 12 to 24 months, the funds are transferred upfront in one lump sum and used to help make the borrower a cash buyer so that they can purchase their desired property in weeks rather than months.

A bridging loan is secured against the property in question and the lender may be able to cease this if the loan is not fully recovered. 

Bridging is different to a traditional mortgage which can be longer and harder to be approved for and may even last 25 or 35 years.

Using a bridging loan is about seizing an opportunity – whether it is to buy a very attractive property under a tight deadline or if there is potential to add value to it and sell it on.

Do I Need a Good Credit History To Be Eligible For a Bridging Loan?

Not necessarily. You do not need a perfect credit score or history to be approved for a bridging loan. The loan is secured against a property and therefore the value and condition of this property and its future potential value is very important during the lender’s decision process.

Certainly, if you are applying for a regulated bridging loan against your own home, the lender may run a credit check and be more trusting to those with good or fair credit scores.

With unregulated bridging loans, most UK bridging lenders are willing to take a view on those with less than perfect credit scores – provided that they have strong financial plans and an exit strategy to offer confidence in their project.

Do I Need To Have a Regular Income To Be Approved For a Bridging Loan?

Not necessarily. For some property developers, they may be looking to purchase a property using a bridging loan and flip it as their main form of income. Your previous track record and financial record with other property schemes will often be considered during the underwriting process.

If you are applying for a regulated bridging loan, your income may be taken into consideration as part of the lender’s affordability assessments. 

But for unregulated bridging, you do not need a salary to be approved. Of course, this might be relevant if you are looking to borrow large sums through a large bridging loan.

How Soon Can I Be Approved For a Bridging Loan?

Bridging lenders and brokers can often provide indicative terms on the same day of applying. So if you have a loan amount in mind and how much you can put towards a deposit, you can receive some indicative terms.

To progress this, you will need to provide evidence of plans, costs and an exit strategy and if approved, this will give you a decision in principle (also available in a few days).

Subject to further checks by the lender and liaison with your solicitor, it is common for bridging loans to be approved and fully funded in 2 to 4 weeks.

How Do Bridging Loans Work?

Bridging loans are a popular form of short term loans which are used in the UK to purchase a property under a tight deadline or bridge the gap between the purchase of a new property and sale of an existing one.

With fast access to funds, bridging loans are usually processed in days or weeks, helping homeowners who need to move home fast and property developers who wish to expand their portfolios whilst avoiding property chains and lengthy mortgage applications which could take months.

By comparison, a bridging loan can be funded in 2 to 4 weeks, helping borrowers to become cash buyers and move fast on property purchases and other opportunities. The average loan term is 12-24 months and loans are always secured against the property in question.

A bridging loan is secured against property or land and the interest rates are usually around 1% per month and higher than traditional mortgages due to their short term nature. But bridging comes with flexible loan conditions, usually repaid in one lump sum or through monthly interest repayments.

About The Industry

The UK bridging industry is made up of banks, private firms and peer-to-peer platforms. The focus is to offer short term finance for borrowers with flexible needs, typically for property transactions including land purchases and assets that require light and heavy refurbs.

Bridging is popular in industries with time-sensitive capital needs and a diversification of use classes.

The bridging industry is less strict in its criteria compared to traditional property loans or mortgages, but being short-term, they carry higher interest rates of 0.5% to 2% per month, equal to 6% – 24% per year, which may only be 5% per year for mortgages.

The eligibility criteria for bridging is based around security and the property’s potential value, rather than credit scoring.

When Would You Use a Bridging Loan?

Move house – Bridging loans make you a cash buyer and help you purchase a property very quickly. If you are in a position where you have found the ideal house to move to but have not or cannot sell your own, using a bridging loan can help you to act fast and move on the new property immediately. You have the loan duration of 12-24 months to sell your existing home and this will pay off the bridging loan.

Break a chain – Long property chains can be a real headache for homeowners and property developers and with some buyers pulling out from time-to-time, it really slows a purchase down. A bridging loan makes someone a cash buyer, which can help break a chain and not rely on the purchase of properties lower down the chain.

Expand portfolio – For property developers, bridging finance gives them a practical and scalable way to purchase new properties, both residential and commercial. Whether it is for flipping them, refurbishing them or renting them out to tenants, it is possible to accept up to 75% LTV and move quickly on opportunities.

Urgent property purchases – Bridging loans are all about speed. The ability to get indicative terms in 24 hours and get funding in 2-4 weeks plays a key role when buying investment opportunities, purchasing properties under tight deadlines or buying property at an auction (known as auction property finance).

Finance property renovations – Bridging is used for light and heavy refurbishments of both residential and commercial properties. This could be used to flip the property or rent out and eventually convert the bridging loan to buy-to-let. 

Secure land purchases – Bridging offers capital to purchase a site, obtain planning permission and finalise development details before moving onto the construction phase.

Assets with no income – It is possible to purchase assets such as properties or facilities with no regular income, however a deposit and professional business plan is required.

Vacant asset – If a property is distressed or unoccupied, this can be an opportunity to purchase the property through bridging and move quickly.

Business opportunity – Whilst bridging is often associated with property purchases, they can be used for other business opportunities when you need capital quickly and have access to good security and collateral. Bridging finance is often used by hotels, airlines and other industries to help growth periods and fill important gaps in finance.

What Are The Terms of Bridging Loans?

TERMDETAILS
Loan AmountTypically £50,000 to £50 million+, depending on the lender and property value
Loan TermUsually 1 to 24 months, extendable up to 36 months on occasions
Interest Rate0.70% to 1.25% per month (depending on asset class, lender, borrower profile, and risk)
Loan-to-Value (LTV)Up to 75% of the property’s value (higher LTV possible with additional security)
Repayment OptionsMonthly interest (serviced), rolled-up interest (paid at the end), or retained interest
PurposeAssist acquiring an asset quickly and/or with plans to renovate/stabilise 
FeesArrangement fees (2% of loan amount), exit fees (n/a) valuation fees, legal fees
Exit StrategyRequired; typically sale of the property, refinancing, or other clear repayment method
RegulationKP Finance only work in the unregulated market (residential or commercial investment)
Speed of ApprovalFast, often within 2-3 hours for initial decision, with funds typically available in 10-20 days (depending on val/legals)
SecuritySecured against property, either residential, commercial, or mixed-use

What Are The Interest Rates For Bridging Loans?

The interest rates for bridging loans range from c0.70% – c.1.20% per month dependent on asset class, risk, borrower background & leverage. Other factors may include:

  • The lender (regulated or unregulated)
  • The borrower’s credit score
  • The property’s value and opportunity
  • The loan-to-value (LTV) and deposit amount
  • The type of property and its location


How Long Do Bridging Loans Last For?

Bridging loans have a minimum loan term of 3 months and a maximum loan term of 12 months (for regulated) and 24 months (for unregulated). The loan will accrue interest each month and therefore the longer the loan term, the more interest is charged overall.

Depending on the lender and the project, the loan term may be extended. 

The minimum loan term is around 3 months and early exit fees may apply depending on the grace period.

How Do Repayments Work For Bridging Loans?

Monthly interest payments: Borrowers pay the interest on the loan monthly, while the principal is repaid at the end of the loan term. This approach helps manage costs over the loan period, though it requires consistent cash flow to cover monthly payments and a borrower will need to demonstrate affordability.

Rolled-up interest (most popular): The interest is added to the loan balance and repaid in full at the end of the term. This option is useful for borrowers who prefer not to make regular payments but results in a larger repayment amount due to the accumulation of interest. This option will result in obtaining a higher day 1 loan.

Retained interest: The interest for the entire loan term is deducted upfront from the loan amount.
This means the borrower receives a smaller net loan but does not need to make any interest payments during the term. Should you wish to repay the loan early, a pro rata rebate is due on the interest not utilised i.e 12 month term and repaid at month 6 will result in 6 months interest being refunded.

What Are The Typical Exit Strategies For Bridging Loans?

Borrowers are required to have a clear exit strategy when they apply for a bridging loan. The most common exit is the selling of the property and any proceeds are used to pay off the loan in full.

Property developers will purchase a property, make renovations and upgrades to increase its value and then flip it. Once the property is sold, the bridging loan is repaid in full, in one lump sum.

Some developers may be looking to refurb a property and then rent it out to tenants, both residential and commercial such as offices.

Borrowers will commonly refinance their loan under a buy-to-let mortgage to rent out the property to tenants or opt for a longer term mortgage if they prefer.

If the business is cash generating, any revenue or profits can be used to pay off the loan in full.

What Are The Risks and What Happens If You Cannot Repay?

If your project is nearing completion, the lender may work with you and allow you to complete and charge a default interest rate and additional fees.

If the lender insists on being repaid and unwilling to remain in the deal, they could repossess the property.

Therefore, as a property developer or homeowner, you have to be very clear with your exit strategy and have a firm understanding of your costs and timelines to maximise the use of a bridging loan.

See more on what happens if you cannot repay your bridging loan.