How Does a Bridging Loan Work? A Complete Guide
Bridging loans can be secured against residential, commercial, or semi-commercial properties, making them a flexible option when timing is critical. Buying property doesn’t always go smoothly — chains can collapse, auctions move fast, and traditional mortgages often take too long to arrange. In these situations, speed is everything — and that’s where bridging loans come in.
In this guide, we’ll explain what bridging loans are, how they work, the different types available, and how they can help in scenarios like bad credit, unmortgageable properties, and distressed purchases.
What Is a Bridging Loan?
A bridging loan is a type of short-term finance that helps “bridge the gap” between buying a property and securing longer-term funding, such as a mortgage. It’s designed for speed and flexibility, giving you quick access to money when traditional finance might not be available in time.
Learn more from MoneyHelper about how bridging loans are regulated and used in the UK.
How Does a Bridging Loan Work?
Bridging loans are secured against property or land. Once approved, funds can often be released in just a few days — straight into your bank account. The loan is then repaid either when you sell the property, refinance with a mortgage, or release equity another way.
In some cases, automated or desktop valuations can be used, meaning you don’t always need a full valuation. Certain lenders also allow dual representation solicitors, which can make the legal process faster and cheaper.
When Should You Use a Bridging Loan?
Bridging loans are useful in situations as mentioned below:
- Buying property at auction
- Breaking a property chain when a sale is delayed
- Renovating or converting a property before refinancing
- Short-term funding for developers
- Purchasing un-mortgageable properties before refurbishment
- Buying distressed properties or those under market value
- Getting finance quickly after being declined elsewhere
- Securing finance even with bad credit
Bridging loans also offer flexibility in how interest is paid, with both serviced and retained interest options available depending on your circumstances.
When Should You Use a Bridging Loan?
- Residential bridging loans — for homeowners and landlords.
- Commercial bridging loans — for shops, offices, or investment property.
- Refurbishment bridging loans — for properties needing renovation or that are currently unmortgageable.
- Closed bridging loan — has a fixed repayment date.
- Open bridging loan — more flexible, but still must be repaid within the agreed term.
- Regulated bridging loans — for residential properties where the borrower or family will live.
- Unregulated bridging loans — for investment and commercial deals.
How Much Does a Bridging Loan Cost?
Bridging loans are typically more expensive than standard mortgages, so it’s important to understand the costs. Common charges include:
Monthly interest, often between 0.4% and 1.5%
Arrangement fees (usually around 2% of the loan)
Exit fees (sometimes 1% of the loan)
Valuation and legal costs — though automated valuations may reduce these in some cases
Always check the total cost before committing, and make sure you have a clear repayment strategy.
Advantages of a Bridging Loan
The main advantage of a bridging loan is speed. Funds can often be arranged within days, allowing you to move quickly on property opportunities. They’re also flexible and can be used across residential, commercial, or even unmortgageable properties.
Other benefits include:
Possible use of automated valuations or dual solicitors to speed up cases
Available to borrowers with bad credit
Can be used if you’ve been declined elsewhere
Ideal for purchasing distressed or under-value properties
Risks and Considerations
Bridging loans aren’t without risk. Interest rates are higher than mortgages, and fees can add up. If you can’t repay on time, you could face extra charges or even risk losing the property.
That said, lenders often focus more on the property asset than your credit history, meaning bridging finance is accessible even to those with adverse credit or complex situations.
You can read more about bridging loans on the FCA website.
Is a Bridging Loan Right for You?
If you’re a homeowner stuck in a chain, a developer needing fast cash flow, or an investor buying at auction, a bridging loan could be the right solution.
At I F Brokers, we specialise in helping clients across the UK secure competitive bridging finance — whether it’s residential, commercial, or for renovation projects. Even if you’ve been declined elsewhere, we can often find solutions other brokers miss.
Next Steps: Speak to IF Brokers
Need fast, flexible finance? Speak to one of our expert brokers today for a free consultation and find out how a bridging loan could work for you.
Frequently Asked Questions (FAQs)
Can I get a bridging loan with bad credit?
Yes. Because bridging finance is secured against property, lenders often focus more on the asset than your credit history. Even if you’ve been declined elsewhere, IF Brokers may still be able to help.
Do I always need a full valuation for a bridging loan?
Not always. In some cases, lenders accept automated or desktop valuations, meaning the process can be faster and cheaper.
How quickly can I get funds with a bridging loan?
Funds can often be released within days of approval, making bridging finance one of the fastest ways to secure property funding.
What types of properties can bridging loans be used for?
Bridging loans can be used for residential homes, commercial buildings, and properties needing refurbishment that are currently unmortgageable. They can also help purchase distressed or under-value properties.
Can bridging finance use dual representation solicitors?
Yes, some lenders allow dual representation solicitors, which can reduce legal costs and speed up the completion process.
