Understanding bridging loans — a plain-English guide

What exactly is a bridging loan?

A bridging loan is a short-term secured loan — typically 1 to 24 months — designed to "bridge" a gap in financing. It provides fast access to capital when you need to complete a transaction but your long-term financing isn't yet in place or isn't appropriate for the situation.

Unlike a conventional mortgage or business loan, a bridging loan is not designed to be held long-term. The expectation from day one is a clear, credible exit — how the loan will be repaid at the end of the term.

How bridging loan costs work

Bridging loans are priced monthly rather than annually. Typical rates in 2025 range from 0.45% to 1.5% per month depending on:

• → Loan to value (lower LTV = lower rate)
• → Exit strategy clarity and likelihood
• → Property type and location
• → Borrower profile and experience

Interest can be serviced monthly (paid as it accrues) or rolled up (added to the loan and paid at redemption). Rolling up interest means no monthly cash outflow — but the total cost is higher. Lenders also charge arrangement fees (typically 1–2% of the loan) and may charge exit fees.

The exit strategy — the most important question

Every bridging lender will ask: how will this loan be repaid? Common exits include:

When bridging is the right choice

• ✓ Your exit is clear, credible and achievable within the term
• ✓ Speed of completion is essential (auction, chain-break)
• ✓ The property is unsuitable for a conventional mortgage now but will be after work
• ✓ The financial benefit of completing outweighs the bridging cost

When bridging is not the right choice

• ✗ Your exit is uncertain or speculative
• ✗ You're hoping to avoid repaying it by repeatedly extending the term
• ✗ A conventional mortgage would serve the same purpose at lower cost
• ✗ You can't comfortably absorb the cost if the exit takes longer than expected