UK bridging finance comes in several distinct forms, each suited to specific property situations. Choosing the right structure affects your costs, timeline, and overall experience.
This comprehensive guide compares each type, explaining when to use open versus closed, first versus second charge, and regulated versus unregulated options. Understanding these distinctions helps you choose the most cost-effective structure, whether you need business cashflow funding or are refinancing an existing facility.
Open vs Closed Bridging Loans
The first major distinction in bridging finance is between open and closed bridging loans, determined by whether you have a fixed repayment date.
Closed Bridging Loans
Definition Closed bridging loans have a fixed repayment date agreed at the outset, typically when a specific event completes - such as a property sale or long-term finance arrangement.
Characteristics
- Fixed completion date specified in loan agreement
- Lower pricing due to repayment certainty
- Evidence of exit required at application stage
- Most economical bridging option
- Rates tailored to individual circumstances
When to Use Closed Bridging
- You've exchanged contracts on a property sale with fixed completion date
- Long-term mortgage or finance offer confirmed with specific start date
- Definite date when inheritance, business sale, or other funds will arrive
- Property purchase with simultaneous sale completing on specific date
Example Scenario You've found your ideal next home and need to exchange contracts immediately, but your current property sale completes in 8 weeks. A closed bridging loan bridges the 8-week gap with a fixed repayment date when your sale completes.
Open Bridging Loans
Definition Open bridging loans have no fixed repayment date, offering flexibility when your exit timing is uncertain.
Characteristics
- No fixed repayment date (though maximum term applies, typically 12-24 months)
- Pricing reflects flexibility with individual assessment
- Exit strategy required but without specific date
- Early repayment available any time without penalty
- Request your personalized quote
When to Use Open Bridging
- Property listed for sale but no buyer yet secured
- Awaiting planning permission with uncertain timeframe
- Developing property with variable completion timing
- Exit strategy clear but timing uncertain
- Need flexibility to repay when convenient
Example Scenario You're purchasing a property at auction that requires substantial refurbishment before selling. You know you'll sell within 12 months, but the exact sale date depends on refurbishment progress and market conditions. An open bridging loan provides the required flexibility.
First Charge vs Second Charge Bridging
Another crucial distinction relates to the position of the bridging loan against your property - whether it's the primary security or sits behind existing lending.
First Charge Bridging Loans
Definition First charge bridging loans are the primary charge against the property, meaning the bridging lender has first claim if the property is sold.
Characteristics
- Primary charge position on property title
- Competitive rates due to first charge security
- Higher maximum LTV available (up to 75%)
- Simpler legal process
- Most common bridging loan type
When to Use First Charge
- Purchasing property with no existing mortgage
- Refinancing and replacing existing charge with bridging loan
- Property owned outright being used as security
- Lender requires first charge position
Example Scenario You own your home outright (no mortgage) and want to purchase an investment property at auction. A first charge bridging loan secured against your owned property provides the required funding in first position.
Second Charge Bridging Loans
Definition Second charge bridging loans sit behind an existing first charge (usually a mortgage), giving the bridging lender second claim on the property if sold.
Characteristics
- Secondary position behind existing charge
- Pricing reflects additional lender risk with individual assessment
- Lower maximum LTV (usually 50-65% combined LTV)
- Additional legal complexity
- First charge lender consent often required
When to Use Second Charge
- You need additional funding but want to keep existing mortgage
- Existing mortgage has excellent rate you don't want to lose
- First charge lender won't agree to bridging loan replacing their charge
- Combined borrowing needed exceeds single lender's first charge limits
Example Scenario You have a residential mortgage with £200,000 outstanding on a property worth £500,000. You need £100,000 to purchase a development opportunity. A second charge bridging loan for £100,000 sits behind your existing £200,000 mortgage (60% combined LTV), allowing you to keep your competitive existing mortgage rate.
Regulated vs Unregulated Bridging Loans
Bridging loans are either regulated by the Financial Conduct Authority (FCA) or unregulated, depending on the property's intended use.
Regulated Bridging Loans
Definition Regulated bridging loans are FCA-regulated when the property will be your main residence or that of a close family member.
FCA Regulation Applies When
- You or a family member will live in the property as your/their main home
- Property is your primary residence
- You're purchasing a property to live in permanently
Additional Protections
- FCA conduct rules apply
- Detailed affordability assessments required
- Stricter lending criteria
- Additional consumer protection rights
- Clear disclosure requirements
- Complaints can be escalated to Financial Ombudsman Service
Characteristics
- More thorough application process
- Extended arrangement time
- Often higher fees due to regulatory requirements
- More paperwork and disclosure
When It Applies Any bridging loan where you or an immediate family member will occupy the property as a primary residence triggers FCA regulation.
Unregulated Bridging Loans
Definition Unregulated bridging loans fall outside FCA regulation when used for investment, business, or second home purposes.
Common Unregulated Scenarios
- Buy-to-let property purchases
- Property development and refurbishment projects
- Commercial property acquisitions
- Holiday homes or second residences
- Property portfolio expansion
- Business premises
Characteristics
- Faster application and approval process
- More flexible lending criteria
- Decision based on property value and exit strategy
- Less paperwork required
- No formal affordability assessment
- Not covered by FCA regulation or Financial Ombudsman Service
Responsible Lending Even though unregulated, reputable lenders follow responsible lending practices, ensuring borrowers have viable exit strategies and understand the risks.
Specialist Bridging Loan Types
Beyond the main categories, several specialist bridging loan types serve specific purposes.
Development Exit Finance
Purpose Bridges the gap between completing a development and securing a buy-to-let mortgage or selling the property.
Characteristics
- Secured against recently completed development
- Allows time to market property effectively
- Can cover holding costs during sale period
- Often follows development finance facility
Auction Finance
Purpose Specifically designed for property auction purchases requiring completion within 28 days. Learn more about auction finance and the 28-day completion process.
Characteristics
- Extremely fast approval (sometimes same day)
- Funding guaranteed before auction
- Legal work expedited to meet completion deadline
- Often proceeds to longer-term bridging or development finance
Buy-to-Let Bridging
Purpose Purchases buy-to-let properties before transitioning to standard buy-to-let mortgages.
Common Uses
- Property requires refurbishment before BTL mortgage available
- Rental income not yet established to prove for mortgage
- Tenant in place preventing mortgage valuation
- Quick purchase before refinancing
Refurbishment Bridging
Purpose Funds both property purchase and refurbishment costs before refinancing based on improved value.
Characteristics
- Single facility covering purchase and works
- May release refurbishment funds in stages
- Exit onto standard mortgage based on post-work value
- Developer experience may be required
Portfolio Bridging
Purpose Secured against multiple properties to achieve higher loan amounts or better LTV.
Characteristics
- Multiple properties provide cross-collateralization
- Enables larger loan amounts
- Can mix residential and commercial security
- More complex legal work but higher flexibility
Choosing the Right Bridging Loan Type
Decision Framework
1. Repayment Date Certainty
- Fixed date: Closed bridging (lower rates)
- Flexible timing: Open bridging (more flexibility)
2. Existing Charges
- No mortgage: First charge bridging (lower rates)
- Existing mortgage: Second charge bridging or refinance
3. Property Use
- Your home: Regulated bridging (more protections)
- Investment/business: Unregulated bridging (faster, more flexible)
4. Specific Purpose
- Auction: Auction finance (speed guarantee)
- Refurbishment: Refurbishment bridging (includes works costs)
- Development exit: Development exit finance (post-completion holding)
- Portfolio: Portfolio bridging (multiple securities)
Cost Considerations
Lowest Costs
- Closed bridging loans
- First charge position
- Unregulated scenarios
- Standard property types
- Lower LTV (50-60%)
Higher Costs
- Open bridging loans
- Second charge position
- Regulated scenarios
- Complex properties
- Higher LTV (70%+)
Typical Terms and Conditions
Loan Terms
- Duration: 1-24 months (most 6-12 months)
- Amount: £25,250 - £8,000,000+
- LTV: 60-75% typical (higher case-by-case)
Interest Options
- Retained: Deducted upfront from loan advance
- Monthly: Paid monthly during loan term
- Rolled: Added to loan balance, repaid at exit
- Hybrid: Combination of above options
Repayment Options
- Interest-only: Capital repaid at term end
- No monthly payments: Interest retained or rolled
- Early repayment: Usually no penalties after first month
Application Requirements by Type
All Bridging Loan Types
- Property details and valuation
- Exit strategy evidence
- Proof of deposit/equity
- Identity verification
- Credit search consent
Additional for Regulated
- Detailed income and expenditure
- Formal affordability assessment
- Additional disclosure documents
- Extended advice and information period
Additional for Second Charge
- First charge lender details
- Outstanding mortgage balance
- First charge lender consent (often)
- More detailed legal searches
Additional for Development/Refurbishment
- Project plans and specifications
- Professional team details
- Build cost estimates
- Project timeline and milestones
Common Mistakes to Avoid
Choosing Open When Closed Available Open bridging costs more. If you have a fixed repayment date, closed bridging provides better rates.
Not Declaring Main Residence Use Failing to disclose that property will be your home means unregulated loan applied to regulated situation - this can invalidate the loan.
Underestimating Combined LTV Second charge applications sometimes overlook that combined LTV includes first and second charges together.
Ignoring First Charge Consent Some first charge lenders prohibit or restrict second charges. Check before applying.
Assuming Regulation Means Better Regulation provides protections but also adds time and cost. For investment purposes, unregulated may be more appropriate.
How Mallard Bridging Can Help
We provide all types of bridging loans from £25,250 to £8,000,000:
- Open and closed bridging options
- First and second charge facilities
- Regulated and unregulated lending
- Specialist options for development, auction, and refurbishment
- Same-day decisions on most applications
- Rapid funding when urgency dictates
Our specialists assess your situation and recommend the most economical bridging loan structure for your specific needs.
Start Your Application Today
Book a callback to discuss your requirements:
Choose a time that works for you and receive an initial response the same business day.
Speak with a bridging finance specialist:
Call: 0161 883 3708 Email: contact@mallardbridging.co.uk
Available Monday-Friday, 9:00 AM - 5:30 PM
Important Information: Mallard Bridging provides bridging loans and property finance solutions for business and investment purposes across the UK. We are not authorised or regulated by the Financial Conduct Authority. We do not offer consumer credit or residential mortgages for owner-occupation. Think carefully before securing debts against property. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.