A bridging loan is short-term finance secured against property, used to cover the gap between needing money now and a longer-term source of funds arriving.
If you need to move quickly on a purchase, a bridging loan can release funds in days rather than the weeks a mortgage often takes. It does carry more risk than most business finance, so it helps to understand how it works before you apply.
Key Points
- A bridging loan is short-term finance secured on property that lets you borrow quickly, usually up to around 75% of the property’s value, for a few weeks up to 24 months.
- You pay monthly interest of roughly 0.55% to 1.5% plus fees, and typically repay the full amount in one go at the end through a sale or refinance.
- Because your property is at risk if you miss repayments, a bridging loan only suits you if you have a clear, realistic exit plan.
How Does a Bridging Loan Work?
A bridging loan works by the individual or company borrowing a fixed amount against the value of a property, usually up to around 75% of what it’s worth. The loan runs for a short term, typically from a few weeks up to 24 months, and interest is charged monthly rather than yearly.
Most bridging loans are interest-only, so you pay the interest each month (or have it added to the loan) and repay the original amount in one go at the end. That final repayment is called your exit, and lenders will want to see a clear plan for it before they lend.
What Can I Use a Bridging Loan For?
Bridging loans can be used for:
- Refurbishments and renovations
- Buying property at a tight deadline
- Buying a property at auction
- Buying and upgrading residential, commercial, multi unit, HMOs
Bridging loans are used when speed matters more than the lowest possible rate. Common uses include buying a property at auction, funding a refurbishment on a property that isn’t yet mortgageable, buying and selling property for profit, and business purposes such as securing premises while longer-term finance is arranged.
If you’re buying property, remember to budget for Stamp Duty Land Tax, which is paid on top of the loan and its fees.
How Much Does a Bridging Loan Cost?
A bridging loan costs 0.55% to 1.5% per month.
Rates are quoted per month, and in 2026 they typically run from around depending on the loan-to-value, the type of property and how strong your exit plan is. On top of interest, expect an arrangement fee of around 1% to 2%, plus valuation and legal costs, and sometimes an exit fee.
Because fees can be deducted from the loan, the amount you receive can be lower than the headline figure, so always ask for the total cost over your expected term.
Bridging Loan Repayment Example:
A bridging loan repayment usually means paying back the original amount plus the interest and fees in one payment at the end, as this example shows.
Dave buys a run-down commercial unit at auction for £200,000. He needs to complete within 28 days, so he takes a bridging loan of £130,000 and puts in £70,000 of his own savings. The interest is 0.85% a month (£1,105), added to the loan, and the arrangement fee is 2% (£2,600).
After a refurbishment, Dave sells the unit for £280,000 eight months later. He repays his lender £141,440 (the £130,000 loan, £8,840 of interest and the £2,600 fee) and keeps the remaining £138,560, before refurbishment costs, selling costs and any tax.
This example is for illustration only. Rates, fees and terms vary by lender and are confirmed before you commit.
How Do I Repay a Bridging Loan?
The repayments for a bridging loan are monthly interest, but most borrowers roll this up until the end of the loan term and pay it off in full upon the exit.
The two most common exits are selling the property or refinancing onto a longer-term mortgage or loan. If you sell a property that isn’t your main home, check whether you’ll owe Capital Gains Tax on property, as this can affect how much you have left after repaying the lender.
Many bridging loans can be repaid early, but some lenders apply a minimum interest period or an exit fee. It’s worth reading our guide on whether you can repay a business loan early so you know what to look for in your offer.
What Are The Fees For Bridging Loans?
The fees on a bridging loan typically include an arrangement fee, valuation and legal costs, and sometimes an exit fee, on top of monthly interest. The main ones are:
- Arrangement fee: usually 1% to 2% of the loan
- Valuation fee: varies with the value and type of property
- Legal fees: your solicitor’s costs, and often the lender’s too
- Exit fee: 0% to 1% with some lenders, charged when you repay
- Extension fee: usually 0.5% to 1% of the loan per month if you need more time
- Broker or commission fees: disclosed before you commit
What Kind Of Properties Can Be Used For Bridging Loans?
The following properties and land can be used as security for bridging loans:
Agricultural land, bungalows, care homes, chalets, converted barns, cottages, detached homes, farmhouses, guest houses, hotels, maisonettes, mid-terraced homes, offices, petrol garages, semi-detached homes, studio flats, terraces, townhouses and warehouses.
Is a Bridging Loan Right for My Business?
A bridging loan can be right for your business if you have a clear, realistic exit and a time-sensitive reason to borrow. It’s less suitable if your repayment depends on something uncertain, such as a sale that may take longer than planned.
Because the loan is secured on property, your property may be repossessed if you do not keep up repayments. If you don’t want to put property at risk, an unsecured business loan may be a better route.