Bridging loans, also known as bridge financing or bridging finance, are short term funding solutions that give you instant access to cash until long term finance is arranged or existing debts are cleared. They are different to standard loans, so are useful when speed and flexibility is needed. They complete much faster than traditional mortgages but require precise planning.
How Bridging Loans Work
A bridging loan fills the gap between two financial transactions, such as buying a property before selling another or refinancing to a better mortgage. Individuals and businesses use them for all sorts of purposes and lenders can tailor the terms to the borrower’s needs.
Homeowners may use a bridging loan to secure a new property before selling their current one, using the equity in the existing property as a deposit. Businesses may use them to cover operational costs until long term funding, such as equity investment, becomes available.
Most bridging loans are secured against property or land. They have higher interest rates and fees than standard finance but borrowers accept this for instant access to cash. Interest rates on bridging loans can vary depending on the lender, loan size, and risk profile. Terms are usually 1-24 months and lenders focus on the property’s value and repayment plan rather than credit scores. A clear exit strategy, such as selling a property or refinancing, is essential.
Interest can be paid monthly or added to the balance and paid in full at the end. For property transactions lenders may advance up to 80% of the combined property value, with the borrower covering the rest with equity or cash. If the borrower still has a mortgage they may have to make temporary double payments until the original property sells.
Benefits and Uses
Advantages:
Speed: Approval in 24 hours, funds in 3 to 10 days. Urgent cases can fund in 36 to 48 hours
Flexibility: Residential, commercial, semi-commercial, mixed-use, land. 100% bridging loans and non-status loans
Problem solving: Prevent failed transactions, short-term cash flow issues, quick property purchases (auctions)
Property improvement: Funds for renovations, commercial expansions, projects that standard mortgages won’t cover
Investment opportunities: For property investors who need to act fast. 24% of bridging loans are now used for investment projects
Common uses:
Buying a home before selling an existing one
Resolving broken property chains
Purchasing auction properties
Financing renovations or developments
Acquiring land before planning approval
Buying new business premises before selling current ones
Covering working capital or tax bills
Costs
Bridging loans are more expensive than standard finance. Monthly interest is 0.4% to 1.5% depending on the property, deposit size, credit profile and loan type. Non-regulated lenders start at 0.65% for first-charge loans up to 60% LTV.
Extra costs:
- Arrangement fees (1–2% of the loan)
- Valuation fees
- Legal fees for borrower and lender
- Administration fees
- Exit fees (some lenders don’t charge these)
- Broker fees (sometimes waived)
Shorter loan terms reduce total costs. Commercial borrowers should calculate the full cost, including interest, fees, legal work, monitoring and potential extension charges.
Regulation and Risks
Loans against a personal or family home must meet Financial Conduct Authority (FCA) standards and offer borrower protection. Commercial or investment loans are often unregulated which speeds up the process but reduces the safeguards.
Risks:
- Project delays that extend the loan term
- Failure to sell or refinance on time
- Higher borrowing costs
- Personal guarantees that put other assets at risk
- Temporary double mortgage payments
Budgeting, realistic timelines and backup repayment options help mitigate these risks.
How to Choose the Right Broker
Specialist brokers connect borrowers with lenders, explain the terms clearly and speed up the process.
For example KIS Finance is an independent UK broker who offer decisions within 24 hours and completions in under a week for urgent cases. They operate 8am to 10pm daily and deal with complex borrowing needs.
When you are choosing a broker check:
- Loan amount and LTV
- Repayment plan and exit strategy
- Speed of service
- Transparency on all fees
- Access to a wide lender network
- Will work with imperfect credit
- Experience with high value and commercial loans
Bridging loans can be effective for short-term funding when used with a clear repayment plan. The right broker can help secure competitive terms and a loan structure that suits the project.
