A bridging loan is short-term money secured on property. It is expensive per month and fast to arrange, which makes it the right tool for exactly one kind of problem: a gap with a known end.
When a bridge makes sense
Four situations account for most of the bridging we arrange. A chain break, where you want to buy before your sale completes. An auction purchase, where completion is due in 28 days and a mortgage cannot be arranged in time. A refurbishment, where the property is not yet mortgageable or the works need funding in stages. And a property a mainstream lender will not touch, such as a house without a working kitchen, which becomes mortgageable once it has one.
In every case the loan is repaid from a defined event: a sale, a refinance onto a term mortgage, or both. Lenders call this the exit, and no sensible lender, or borrower, agrees a bridge without one.
What it really costs
Bridging is priced monthly. Rates from around 0.55% per month are available on strong cases at modest loan-to-value; higher risk costs more. Add an arrangement fee, typically around 2% of the loan, a lender's valuation, and legal fees for both sides. Some lenders charge an exit fee; we prefer the ones that do not.
Interest is either retained, meaning the whole term's interest is deducted from the advance on day one so there are nothing to pay monthly, or serviced, meaning you pay it each month and receive more on day one. Which is better depends on your cash flow, not on the rate.
How much you can borrow
Most lenders go to around 75% of the property's value, sometimes across more than one property. What matters more than the ceiling is the exit: a lender will want to see the sale agreed, or the refinance approved in principle, before releasing funds.
Regulated or not
A bridge secured on the home you live in is a regulated mortgage contract, with the consumer protections that brings. A bridge on an investment property or a property you will never live in is usually unregulated. The paperwork and the pace differ; the need for a clear exit does not.
What can go wrong
Late exits. A sale falls through, a refinance is delayed, works overrun. Extensions are usually available at a cost, but the honest protection is a margin built into the term at the start and a conversation with the lender the moment the plan slips. The other risk is over-borrowing against an optimistic end value; an independent valuation before you commit is worth its fee.
How we arrange one
We review the property, the purpose and the exit the same day, and indicative terms usually follow within 24 hours. Valuation and legals are instructed in parallel, and completion typically lands two to three weeks from the first conversation. The total cost, in pounds rather than percentages, is set out in writing before anything is signed.
Bridging finance is arranged through our FCA-authorised partners. This article is general information, not advice. Your home may be repossessed if you do not keep up repayments on a loan secured on it.
Written by the Norvex Property team. General information, not advice on your circumstances; speak to us about your own property.