What is a Bridging Loan?
A bridging loan is a short-term financing solution secured against property. It "bridges" the gap between an immediate funding need and longer-term finance or the sale of an asset.
Bridging loans are typically used when speed is essential and traditional mortgage funding isn't fast enough or suitable for your situation.
Key Characteristics of Bridging Loans
Short-Term Duration Bridging loans typically last between 1 and 24 months, though most are repaid within 6-12 months.
Secured Against Property Bridging finance is secured against UK residential or commercial property, providing lenders with security and enabling faster decisions.
Fast Approval and Funding Unlike traditional mortgages that can take weeks or months, bridging loans can be approved within 24 hours with funds released in as little as 48 hours.
Higher Interest Rates Due to their short-term nature and speed, bridging loans carry higher interest rates than standard mortgages, typically ranging from 0.5% to 1.5% per month.
Flexible Security Bridging loans can be secured against the property being purchased (if applicable) or other property you own.
Common Uses for Bridging Loans
Property Auctions Auction purchases require fast completion (typically 28 days). Bridging finance provides the speed necessary to meet these deadlines.
Property Development Developers use bridging loans to purchase and refurbish properties before refinancing onto development finance or selling the completed project.
Chain Breaks When your property sale falls through or is delayed, bridging finance lets you proceed with your onward purchase without losing the property.
Business Cashflow Business owners use bridging finance to unlock property equity for working capital, stock purchases, and operational costs when speed matters.
Commercial Property Acquisition Businesses acquiring commercial premises when traditional commercial mortgages would take too long to arrange.
Refurbishment Projects Funding to purchase and refurbish uninhabitable properties that don't qualify for standard mortgages until works are complete.
Types of Bridging Loans
Closed Bridging Loans These have a fixed repayment date, typically when a property sale completes or long-term finance is arranged. Lower rates apply due to the certainty of repayment.
Open Bridging Loans More flexible with no fixed repayment date, though a maximum term applies. Slightly higher rates reflect the increased flexibility.
First Charge Bridging Loans The bridging loan is the primary charge against the property. These typically offer better rates as the lender has first claim on the asset.
Second Charge Bridging Loans Secured as a second charge behind an existing mortgage or loan. Rates are higher due to the additional risk to the lender.
Regulated Bridging Loans When the property will be your or a family member's main residence, the loan may be FCA regulated with additional consumer protections.
Unregulated Bridging Loans For investment properties or commercial use, these fall outside FCA regulation but still follow responsible lending practices.
How Much Can You Borrow?
Bridging loan amounts in the UK typically range from £25,250 to £10 million or more for specialist cases.
Loan-to-Value (LTV) Most bridging lenders offer up to 65-75% LTV, meaning you'll need 25-35% equity or deposit. Some specialist lenders may offer higher LTV in certain circumstances.
Gross Loan vs Net Loan
- Gross Loan: The lender retains interest in advance, reducing the amount you receive upfront
- Net Loan: You receive the full loan amount and pay interest monthly or at redemption
Bridging Loan Costs
For a full breakdown, see our bridging loan costs and fees guide.
Interest Rates Typically 0.5% - 1.5% per month, charged monthly or retained upfront. Annual equivalent rates range from 6% - 18% depending on risk, LTV, and loan term.
Arrangement Fees Usually 1-2% of the loan amount, covering underwriting and legal costs.
Valuation Fees Independent property valuation fees vary based on property value and complexity, typically £500 - £3,000.
Legal Fees Both lender's and borrower's legal costs must be covered. Budget £1,500 - £5,000 depending on complexity.
Exit Fees Some lenders charge exit or redemption fees, typically 0.5% - 1% of the loan amount.
Advantages of Bridging Loans
Speed of Funding Decisions within 24 hours and funds released in 48 hours when needed.
Flexible Criteria Based on property value and exit strategy rather than income multiples or employment status.
Complex Cases Accepted Properties in poor condition, unusual constructions, or complicated ownership structures can often be financed.
No Monthly Payments Required Interest can be retained or rolled up, avoiding monthly payment obligations if preferred.
Multiple Properties Can be secured against multiple properties to reach required LTV.
Disadvantages to Consider
Higher Costs Interest rates significantly exceed standard mortgage rates due to the short-term nature and speed.
Requires Exit Strategy You must have a clear plan to repay the loan - through property sale, refinancing, or other means.
Fees Can Add Up Multiple fees mean the total cost of borrowing can be substantial, particularly for very short-term loans.
Risk to Property Your property is at risk if you cannot repay the loan as agreed.
Is a Bridging Loan Right for You?
Bridging loans work best when:
- You need funding within days or weeks rather than months
- Traditional finance isn't suitable for your property or situation
- You have a clear exit strategy to repay the loan
- The opportunity justifies the higher short-term costs
- Speed is more important than securing the lowest possible rate
How Mallard Bridging Can Help
At Mallard Bridging, we provide bridging loans from £25,250 to £8,000,000 with:
- 24-hour decisions on most applications
- 48-hour funding when required
- 100% transparency - no hidden fees
- Flexible criteria for complex cases
- Expert guidance throughout the process
Whether you're purchasing at auction, developing property, or need to move quickly on an investment opportunity, we're here to help.
Next Steps
Ready to discuss your bridging finance needs? Our specialists are available Monday-Friday, 9:00 AM - 5:30 PM.
Call: 0161 883 3708 Email: contact@mallardbridging.co.uk Book a Callback: Schedule a Call
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.