Bridging Loans and Finance
Why Choose Ascot Mortgages
What Our Clients Say About Us
Last Updated:
17.04.2025
Written by:
Phil Greenwood
Ascot Bridging Expert
Last Updated:
17.04.2025
What is a bridging loan?
A bridging loan is a short-term financial solution designed to cover immediate funding needs while awaiting long-term financing or the sale of an asset. Typically used for periods ranging from a few weeks to 24 months, these loans are tailored for quick access to funds, often within days. Bridging loans are popular among property investors, homebuyers, and developers who need to secure opportunities or resolve cash flow issues quickly. They are commonly used for downsizing in retirement, buying properties at auction, purchase and renovation of properties for ‘flipping’ and preventing a breakdown of a property chain.
At a glance, the main advantages of a bridging loan are:
- Short-term nature: ideal for temporary financing gaps
- Flexible interest payment options: choose between monthly interest payments, rolled-up (paid at the end), or retained interest (included in the loan amount), meaning you don’t have to worry about monthly payments
- Speed: bridging loans can be arranged relatively quickly, in as little as 72 hours in some circumstances – a broker will be needed to facilitate a loan this quickly.
What are the different types of bridging loans?
There are two different types of bridging loans. These are open bridging loans and closed bridging loans.
An open bridging loan has no specific date by which time it needs to be paid off. However, the majority of lenders would expect you to pay off this loan within 12 months. Some lenders may offer an extended repayment period.
On the other hand, a closed bridging loan means you will have a fixed date by which you need to repay your loan. In most cases, this date will be determined by when you know you will have the funds available to pay it back, such as when the sale of your house has successfully gone through.
Generally speaking, a closed bridge loan is often cheaper than an open bridge loan due to the fact there is less flexibility in terms of repayment.
How does a bridging loan work?
If you decide to take out a bridging loan, your lender will place a ‘charge’ against your property. If you fail to repay your bridging loan, this means that the lender can take the repayment from the property sale.
If you do not have any other loans tied up in your property, this is considered to be a first charge bridging loan. This may be the case if you own the property outright. If you fail to repay the loan, and the property is then sold to cover the debt, the bridging loan lender will then receive the repayment first.
If you have one or multiple loans against your property, like a mortgage, this is considered to be a second charge bridging loan. This means that if you fail to repay your bridging loan and the property is sold to cover the debt, the mortgage provider will be repaid first and the bridging loan lender will receive its repayment afterward.
Who benefits from a bridging loan?
Bridging loans are suitable for individuals or businesses in various situations and can mean the difference in not losing out on your dream home or investment opportunity. It allows you to act and move quickly in the property market and decrease the risk of losing out to cash buyers. Typical scenarios when bridging finance is used:
- Property purchases at auction: access funds promptly to secure auction deals
- Chain breaks: keep property chains intact when unexpected delays arise
- Renovation or development: finance refurbishment or development projects before refinancing or selling
- Purchasing un-mortgageable properties: acquire properties that require a significant amount of work to bring them up to a standard for refinance using a standard mortgage.
How much can I borrow?
Whilst we generally deal with bridging loans up to £25m, there are lenders willing to lend up to £100m, with the loan to value typically capped at 80% of the properties value being used as security. Each lender has their own policy and criteria in relation to maximum loans and loan to values so seeking professional advice from an adviser who understands this market and will assess your individual circumstances to present the best option available to you is crucial.
What are the pros and cons of a bridging loan?
There are many factors to take into account when it comes to deciding if a bridging loan is right for you.
Pros
- Borrow more money – since bridging loans are secured against a property, this means you should be able to borrow a large amount of money
- Quick payouts – unlike a mortgage, bridging loans can be paid out within a matter of days
- Choice and flexibility – you will find that choosing a bridge loan provides you with a range of flexible options, such as fixed and variable interest rates, and different loan types, including open and closed loans.
Cons
- Fees – there are usually several fees, including arrangement fees, valuation fees, legal fees and exit fees
- Higher interest rates – you can expect to pay a higher interest rate compared to other types of loan
- The risk of repossession – since a bridging loan is usually secured against your property, there is a risk of your home being repossessed if you are unable to keep up with your repayments or not repay the loan in the term agreed.
Applying for a bridging loan
Each lender has its own set of lending criteria a borrower needs to meet to be considered for a loan. Some lenders focus on the lower value and lower risk type lending whilst there are others specialise in niche areas of the market. There are two main elements to consider before applying:
1. Security
The lender will require a form of security. This can be one or more properties.
2. Exit/repayment strategy
A well-planned exit or repayment strategy is essential. In most cases, this involves either selling the property or refinancing with a traditional mortgage.
Bridging loans can be applied and set up for private individuals, Limited Companies, Partnerships and Offshore Companies. If you have any questions about your eligibility or feel your circumstances are complex, then speak to one of our advisers.
What fees will I pay?
You can expect to pay various set-up fees when you take out a bridging loan. These include:
Arrangement fees – this cost can include lender arrangement fees, which are usually a percentage of the loan amount
Valuation fees – to be approved for a bridging loan, it’s likely you’ll need a valuation on the property
Legal fees – you will need legal representation, as will your lender, to cover the cost of drawing up legal documents
Exit fees – your lender may charge an exit fee when the loan comes to an end.
How do I find the best bridging loan deal?
It’s important that you find the right bridging loan at the right rate. Keep the following points in mind when you’re looking to take out this type of loan.
Understand what you need
To find the best bridging loan deal for you, you will need to be clear on what it is that you need from your loan in terms of how much you would like to borrow and for how long. It’s important to note that bridging loans are expensive, so the longer the term, the more it will cost you.
Be clear about your circumstances
It’s also a good idea to fully understand your situation. This means knowing:
- how much your property is worth
- the details of your mortgage if you have one, including how much you owe
- how much equity you have in the property
- what your monthly income and expenditure is
- how you plan to exit the bridging finance.
Do your research
To ensure you take out a bridging loan that ticks all the right boxes, it’s important to do your research first. There are lots of loan types available, so it can be useful to compare your different borrowing options.
You might find it helpful to consider the following when it comes to choosing your bridging loan:
- Interest rates: often quoted monthly, bridging loan rates depend on the loan-to-value (LTV) ratio, security, and the lender’s risk assessment
- Costs and fees: there will be fees to consider such as a valuation fee, legal fees, a broker fee, an arrangement fee and potentially an exit fee
- Flexible terms: some lenders offer drawdown options, allowing you to access funds in stages, reducing interest costs.
How Ascot Mortgages can help
At Ascot Mortgages, we have experts in our team that arrange and secure bridging finance every day. We have arranged finance for relatively small amounts to assist with a quick refurbishment and sale all the way up to multi-million pound developments. We can meet tight deadlines or find finance for complex situations.
Whatever your situation, contact us today. Call our team on 01925 711558 or book an appointment to speak to one of our professional advisers at a time that suits you.
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FAQ
01/ How much can I borrow with a bridging loan?
Bridging loans typically range from £25,000 to £25 million. The amount you can borrow will be determined by your specific requirements, the value of the property being used as security, your credit history and your current financial situation.
In most cases, the lender will allow you to borrow up to 75% of the property value, but this will depend on your personal finances.
02/ What are the typical interest rates for bridging finance?
Rates vary based on the property type, exit strategy, loan to value, and lender. Rates are typically between 0.5% and 2% per month.
Bridging loan interest rates can either be fixed or variable. Fixed interest rates mean that you will know exactly how much you will be charged, and your monthly repayments are guaranteed to remain the same for the duration of the loan. Meanwhile, a bridging loan with a variable interest rate means the amount you pay can change.
03/ Do I need a deposit?
Most lenders require equity in the form of property as security, but specific deposit requirements depend on the lender.
04/ What’s the repayment period for a bridging loan?
Bridging loans typically last between 1 and 18 months, with flexible repayment terms.
05/ Can I use a bridging loan if I have poor credit?
Yes! Bridging finance often focuses on the value of the security property rather than your credit score. However, it is important to note that you will be considered ‘higher risk’, so therefore the cost of your loan will likely be higher too.
It’s a good idea to check your personal credit score before you apply for a bridging loan. This will enable you to get an idea of what your current credit history looks like.
06/ How long does it take to get a bridging loan?
A bridging loan can take anywhere from a few days to several weeks to complete. This is due to the fact that it is a secured loan which, if you’re using a property as collateral, will require a valuation and credit checks.
07/ Is a bridging loan right for me?
A bridging loan could be the right decision for you if you need a short-term loan for a large sum of money that you will be able to repay quickly. To be eligible for a bridging loan, you will need to be aged 18 or over, a UK resident and have a valuable asset to use as collateral, such as a property. Whether a bridging loan is right for you or not will also depend on your personal financial situation and your borrowing requirements.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
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