When you’re moving home, timing doesn’t always line up. You might find the right place before your current one has sold, or need to move faster than your finances allow.
That’s where a bridging loan can come in. It’s one way people deal with short gaps in funding during the wider moving home process – but it’s not a solution you’d use lightly.
So what exactly is a bridging loan, how does it work, and when does it make sense to use one? Let’s break it down.
Bridging loans explained
A bridging loan is a short-term loan used to cover a gap in funding when you’re buying a property but the money you need isn’t available yet.
It is sometimes described as temporary, property-backed funding, meaning your home (or another property) is used as security for the loan. If the loan isn’t repaid as planned, that property could be at risk.
In the UK, bridging loans are typically offered by specialist lenders rather than high-street banks.
How does a bridge loan work?
A bridging loan gives you access to funds now, with the expectation that you’ll repay the loan once money becomes available later. These loans are designed to run for months rather than years.
In practice, it works like this:
- The loan is secured against property. The lender places a legal charge on the property you’re using as security.
- That charge can be first or second. If there’s already a mortgage on the property, the bridging loan is usually a second charge (the mortgage lender is repaid first). If there’s no mortgage, it’s typically a first charge.
- You agree on an exit strategy upfront. This is how you plan to repay the loan – for example, by selling a property or refinancing onto longer-term finance. Because bridging loans aren’t designed to run indefinitely, this plan is essential.
Types of bridging loans
There are two main types of bridging loans, based on how certain the repayment timing is.
1. Open bridging loans
An open bridging loan doesn’t have a fixed repayment date. It’s usually used when you know how the loan will be repaid, but not exactly when – for example, if you’re waiting for a property to sell but haven’t exchanged contracts yet.
Because there’s more uncertainty around timing, open bridging loans are typically more expensive than other options.
2. Closed bridging loans
A closed bridging loan has a clear, agreed repayment date from the start. This is usually the case when you already have a confirmed sale date or another guaranteed source of funds lined up.
With more certainty around repayment, closed bridging loans often come with lower costs than open ones.
What can I use a bridging loan for?
People often use bridging loans in situations where timing is the main problem, rather than affordability.
Common use cases include:
- Buying a new home before selling your current one. This is one of the most common reasons people use bridging finance, especially when they want to move quickly. You can read more about this scenario in our guide to buying a property before you’ve sold your current home.
- Buying a property that isn’t mortgageable yet. For example, a home that needs significant work before a lender will offer a standard mortgage.
- Buying at auction. Auction purchases often require completion within a short timeframe, which can make traditional mortgages impractical.
- Short-term property-related needs. In some cases, bridging loans are used for things like refinancing while waiting for longer-term funding to be arranged.
Bridging loans are designed to deal with specific, time-limited situations.
How much do bridging loans cost?
The cost of a bridging loan isn’t just about the interest rate. It’s made up of several parts, and it’s the total cost that matters most.
You’ll usually need to account for:
- Interest, which is often charged monthly rather than annually
- Arrangement fees, paid to the lender for setting up the loan
- Valuation fees, to assess the property being used as security
- Legal fees, covering the lender’s and your own legal work
- Exit or administration fees, charged by some lenders when the loan is repaid
Bridging loans are not suitable for everyone. You’ll need a clear repayment plan from the start, as this helps you understand the costs and how the loan will be repaid.
What are the interest rates for a bridging loan?
Bridging loan rates are usually quoted monthly and may not be directly comparable to annual percentage rates (APRs) used for standard mortgages.
That can make them look lower at first glance, but it’s important to remember that a monthly rate adds up over time. A loan that runs for several months will cost more than the headline figure might suggest, especially if repayment is delayed.
Because bridging loans are designed for short, time-limited use, interest rates are generally higher than standard mortgage rates. This is normal for this type of borrowing, and another reason why they work best when the loan period is kept as short as possible.
How to apply for a bridging loan
Applying for a bridging loan often focuses more on the property and the repayment plan than day-to-day income, but lenders will still carry out their own assessments.
When you apply, lenders will typically look at:
- The property being used as security and its value
- How much you want to borrow compared to that value (loan to value)
- Your exit strategy (how you plan to repay the loan)
- The level of risk overall, including timing and market conditions
Before you apply, it helps to be clear on how long you expect to need the loan for and what will trigger repayment. Because bridging loans are designed to move quickly, having this information ready can make the process smoother.
While bridging loans can be arranged faster than a traditional mortgage, there’s still an assessment involved. How long approval takes depends on the property, the lender, and how straightforward your plans are.
Pros and cons of bridging loans
Like any form of borrowing, bridging loans have clear upsides and trade-offs. Whether they’re right for you depends on your situation and timing.
Pros of bridging loans
- Speed and flexibility. They can help you move quickly when timing matters.
- Works where mortgages can’t. Useful when a standard mortgage isn’t available yet.
- Short commitment. Intended as temporary funding, not long-term borrowing.
Cons of bridging loans
- Higher costs. Interest rates and fees are typically higher than standard mortgages.
- Tight repayment window. You need a clear plan to repay the loan within a limited timeframe.
- Property at risk. The loan is secured against property, failing to repay it could put that property at risk.
Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured on it.
Alternatives to bridging loans
A bridging loan isn’t the only way to deal with a timing gap. Depending on your situation, other options may be more suitable.
For example, if timing allows, a standard mortgage may be a better fit for some people. These are usually cheaper and designed for longer-term borrowing. You can explore different types of mortgage to understand what might work as a longer-term solution.
If you’re moving home and staying with the same lender, porting your existing mortgage could also be an option. Or, if you already own property and need to release some value, remortgaging may help raise funds without using short-term finance.
Each of these routes comes with its own trade-offs. The right choice depends on how quickly you need to act, how long you’ll need the funds for, and how certain your plans are.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What to do next
Bridging loans can be useful in the right situation, but they’re not something you’d rush into without thinking it through. If timing is tight and you’re weighing up short-term options, it can help to talk things through before you commit.
A mortgage broker can help you understand whether a bridging loan fits your situation or whether another route might work better. If you want that kind of guidance, speaking to a mortgage broker can help you get clarity.
Frequently asked questions
Can I get a bridging loan with bad credit?
It may still be possible, but it depends on your circumstances. Bridging lenders tend to focus more on the property being used as security and your exit strategy than on credit score alone. That said, having poor credit can limit your options and increase the cost.
How long does it take to get approved for a bridging loan?
There’s no fixed timeline. Some bridging loans may be arranged more quickly than a standard mortgage, but approval time depends on the property, the lender, and how clear your repayment plan is.
How much can I borrow with a bridging loan?
This depends on the value of the property and how much you want to borrow compared to that value (loan to value). Many lenders cap borrowing at a percentage of the property’s value, but the exact amount varies by lender and situation.
