How do bridging loans actually work?
A bridging loan is short-term finance secured on UK property or land, used to cover a timing gap until a sale, refinance or other planned exit repays it. Interest is usually priced per month and often retained in the loan, terms commonly run up to 12–24 months, and lenders underwrite the security and the exit first. It is more expensive than a mortgage and only works with a credible way out.
Last reviewed: 4 October 2026
BridgingLoans.online is an independent UK introducer operated by PASECOM GROUP LTD (company 17139327, ICO ZC117546). We do not lend and we do not advise. Nothing on this page is a quote, an MCOB illustration or an offer of credit.
What problem is a bridging loan built to solve?
High-street mortgages are designed for long-term borrowing on properties that are ready to live in or let. They take time to underwrite and they struggle with deadlines, unusual properties and situations where the borrower’s income is not the main story. Bridging fills that gap. It is designed to be repaid quickly, from an event you can describe and evidence, rather than over 25 years from salary.
Typical triggers are an auction purchase that must complete on a fixed date, a broken chain, a property that is not yet mortgageable, a refurbishment before letting or sale, or a short-term capital need secured on existing equity. In each case the bridge buys time; it is not meant to become the long-term debt.
What are the core mechanics?
| Feature | How it usually works | Why it matters |
|---|---|---|
| Security | A first or second charge over UK property or land | The property is at risk if the loan is not repaid |
| Term | Commonly up to 12–24 months; regulated loans usually no more than 12 | Interest runs for the whole term you choose |
| Pricing | A monthly interest rate plus an arrangement fee and other costs | Compare total repayable, not the rate alone |
| Interest method | Retained, serviced or rolled-up | Changes the gross loan and your monthly cash flow |
| Loan size | Capped as a percentage of value, usually on the gross loan | Cash in hand is less than the headline LTV |
| Exit | Sale, refinance or another evidenced repayment source | The single biggest underwriting question |
Gross versus net
Net is the cash released to you or your solicitor. Gross is net plus the facility fee (often added to the loan) plus retained interest. LTV caps usually apply to the gross figure, so the cash available is lower than the advertised maximum LTV. The full method is in net vs gross bridging loan: how to calculate.
Paying interest
Retained interest is worked out for the term and added on day one, so there is usually no monthly payment. Serviced interest is paid monthly and needs income the lender accepts. Rolled-up interest is added as it accrues and may compound. See retained vs serviced vs rolled-up interest.
Worked example: a nine-month bridge on a £400,000 property
Suppose you need £200,000 of cash against a £400,000 property for nine months, using this site’s teaching defaults of 0.85% a month retained and a 2% fee.
| Line | Amount |
|---|---|
| Security value | £400,000 |
| Net funds needed | £200,000 |
| Arrangement fee (2% of net, added to the loan) | £4,000 |
| Interest base (net + fee) | £204,000 |
| Monthly interest at 0.85% | £1,734 |
| Total interest (9 months, simple retained) | £15,606 |
| Gross facility | £219,606 |
| Net LTV | 50.0% |
| Gross LTV | 54.9% |
| Total cost of credit (fee + interest) | £19,606 |
Indicative educational example using this site’s calculator method: fee = net × 2%; interest = (net + fee) × 0.85% × months; gross = net + fee + interest. The 0.85% a month and 2% fee are teaching defaults, not our rates and not a quote. Valuation, legal and broker costs are not included.
You receive £200,000, but the lender secures £219,606 and that is the balance due on exit, before any rebate. The gross LTV of 54.9% is what underwriting focuses on. Change the term to six months in the calculator and the interest drops by a third — which is why a realistic, evidenced term matters.
What happens from enquiry to repayment?
1. Enquiry and decision in principle
You set out the value, the cash you need, the term, who will live in the property and how you will repay. A lender or broker may issue a decision in principle if the case fits their criteria. That is not an offer.
2. Valuation and legal work
The lender instructs a valuer, often RICS-qualified. Solicitors check title, existing charges and the loan documents. Problems found here — a lower valuation, a title defect, a missing consent — are the usual cause of delay.
3. Offer, charge and drawdown
Once conditions are met the lender takes its charge and sends net funds to your solicitor.
4. The term
You carry out the plan: complete the sale, finish works, secure the refinance. Keep the lender informed if anything slips.
5. Exit
The loan is repaid from the planned source. If that source is late, interest continues and an extension is at the lender’s discretion, not a right.
What do lenders actually underwrite?
Bridging underwriting is asset-led, but not asset-only. Lenders look at the value and saleability of the security, the size of the loan against it, the credibility and timing of the exit, and the borrower’s history. On regulated loans they also assess affordability. On serviced loans they check that the monthly payments can be met. Adverse credit does not automatically rule a case out, but it can change the price, the maximum LTV and whether a refinance exit is realistic — see bridging loans with bad credit.
The exit carries the most weight. A sale needs a realistic price and timescale for that property in that market. A refinance needs a future lender who will actually lend on the finished asset to that borrower. More detail is in exit strategies for bridging finance.
Open or closed, first or second charge?
A closed bridge has a repayment date the lender can treat as fixed, such as an exchanged sale. An open bridge has a maximum term and a plan, but no fixed date. Most auction and refurbishment loans are open. See open vs closed bridging loans.
A first charge means the bridging lender is first in line, typically because any existing mortgage is repaid. A second charge sits behind an existing mortgage and needs that lender’s position to be respected; combined borrowing across both charges still has to fit the value.
For the short overview, see how it works. For a breakdown of every charge, read bridging loan costs and fees.
Is this regulated or unregulated bridging?
Occupancy is the legal dividing line. If you or a close family member live in, or will live in, the property as a home (the usual test is at least 40% of it), the loan is likely to be a regulated mortgage contract, with affordability checks, consumer protections and usually a maximum 12-month term. BridgingLoans.online is an introducer, not an FCA-authorised broker and not a lender: where occupancy is yes, we pass a complete pack to an FCA-regulated broker, who explains the protections that apply. Investment, commercial, vacant buy-to-let, land and many company or SPV files are often unregulated. Either way the figures here are indicative only and this is not advice or a product recommendation. See regulated bridging and unregulated bridging.
Your home or property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
Indicative estimate only. Not a quote, illustration under MCOB, or offer of credit. BridgingLoans.online is a trading name of PASECOM GROUP LTD (company 17139327, ICO ZC117546), an introducer, not a lender. Email hello@bridgingloans.online.
Last reviewed: 4 October 2026.
FAQs
What is a bridging loan in simple terms?
A short-term loan secured on property or land that covers a timing gap until a sale, refinance or other planned event repays it. It is priced monthly, usually costs more than a mortgage and needs a credible exit.
How long can a bridging loan last?
Terms commonly run up to 12–24 months. Regulated bridging, where you or family live in the property, is usually limited to 12 months. Interest runs for the whole term you agree.
Do I make monthly payments on a bridging loan?
Not if interest is retained or rolled up — it is added to the loan and repaid at the end. Serviced interest is paid monthly and needs income the lender will accept.
How much can I borrow with a bridging loan?
Lenders cap the loan as a percentage of the property value, usually measured on the gross loan including fees and retained interest. The cash you receive is therefore lower than the headline LTV.
What happens if I cannot repay the bridging loan on time?
Interest continues, and the lender may agree an extension, usually at a cost, or may take steps to recover the loan. Speak to the lender early. Your property may be repossessed if you do not keep up repayments.
Next step
Use the calculator for an indicative starting point, then enquire if you want an introduction.