What are Bridging Loans?

Types of Bridging Loans

To choose the right product, you need to understand how lenders group bridging loans. Typically, they look at the charge position, the rate type, and the repayment structure.

First Charge and Second Charge Bridging Loans

With a first charge bridging loan, the lender takes the main legal charge over the property. That charge takes priority over any other borrowing.

With a second charge bridging loan, the bridging lender sits behind your existing mortgage. The mortgage lender is repaid first; then you repay the bridging loan.

If the property has no mortgage, the bridging loan will usually take first charge.

Fixed Rate and Variable Rate Bridging Loans

With a fixed rate bridging loan, the interest rate stays the same for the agreed term. This can make costs easier to predict.

With a variable rate bridging loan, the interest rate can change in line with wider market movements, including Bank of England base rate changes.

Bridging loan rates usually sit higher than mortgage rates because bridging finance runs for a shorter time and carries higher risk for the lender. The exact rate depends on the property, the borrower profile, the loan structure, and the exit strategy.

Open and Closed Bridging Loans

With an open bridging loan, you do not agree a fixed repayment date. Instead, you repay the loan within an agreed time window, often up to 24 months.

With a closed bridging loan, you agree a fixed repayment date from the start. This option is common when contracts have exchanged or a clear completion date or refinance date exists.

How Much Can I Borrow with a Bridging Loan?

Bridging loans often start from £25,000 and can reach £25 million.

Lenders base the loan size mainly on loan to value. In most cases, lenders offer up to 75% LTV; some specialist products can go higher in the right circumstances.

Your borrowing potential depends on the property value, the type of project, and the strength of your exit strategy.

How Much Does a Bridging Loan Cost?

Bridging loans include interest and fees, so you should understand the full cost from day one. Once you do, you can compare products properly and avoid surprises later.

Typical bridging loan costs include:

• Interest charged monthly, or rolled up into the loan
• Arrangement fee, often around 2% of the loan amount
• Administration fee set by the lender
• Legal fees for conveyancing and documentation
• Valuation fees for the property
• Exit fee, where applicable

Not every loan includes every fee. A specialist broker will confirm the exact costs before you proceed, and help you compare the total cost, not just the headline rate.

How to Get a Bridging Loan

Bridging finance sits in the specialist lending market, so high street banks rarely offer it directly.

A specialist broker like GPS Financial can access a wide panel of bridging lenders and recommend a structure that suits your project. A broker can also match the right lender to your timeline, your property type, and your exit plan.

Unlike a standard mortgage, bridging loan approval focuses less on income and credit scoring and more on:

• The value and condition of the property
• The viability of the project and timeline
• Your exit strategy

Your exit strategy might be a property sale, a refinance, or other verified funds to repay the loan.

Alternatives to Bridging Loans

In some cases, an alternative finance option may suit you better, such as:

• Remortgaging to release equity
• Let to buy mortgages
• Secured loans
• Personal loans for smaller borrowing amounts

Each option has limitations, particularly around speed, flexibility, and property condition. It helps to compare them against your deadline and your intended exit.