Bridging finance is a short-term, secured loan designed to fill a gap between two property transactions. It is not a substitute for a mortgage — it is a temporary funding solution that provides fast access to capital when speed or timing makes a conventional mortgage impractical. In a market where timing is often critical, such as London, bridging is a tool that buyers, landlords, and developers use regularly. This guide explains what bridging finance is, when it is used, what it costs, and how the process works in practice. For an overview of our London mortgage services, see our London office page.
Bridging Finance at a Glance
Short-term secured finance, often for one to twenty-four months. Used for auction purchases, chain breaks, unmortgageable property, refurbishment, and capital raising. Lenders focus on security value and exit strategy rather than income in the traditional sense. Interest can be rolled up, serviced, or retained. Total cost includes arrangement fees, valuation, and legal costs alongside interest. A clear, realistic exit plan and a contingency are essential.
What Is Bridging Finance?
A bridging loan is a short-term loan, often lasting between one and twenty-four months, secured against property. It is designed for situations where you need to complete a purchase or access funds quickly, and where a standard mortgage either cannot be arranged in time or is not available for the property in question.
Bridging loans are available for both residential and commercial property. They are commonly used by property investors, developers, landlords, and homeowners who need to act quickly in a transaction. In London, where transaction values are high and competition for certain properties is intense, the speed bridging offers can be decisive.
When Is Bridging Finance Used?
Buying at Auction
London has one of the most active property auction markets in the UK. Property auctions often require completion within 28 days of the hammer falling, which is too fast for most conventional mortgage applications. A bridging loan allows you to complete the purchase to the auction deadline and then arrange a standard mortgage or sell the property afterwards. For buyers active in London’s auction market, having bridging finance arranged in principle before bidding can be important.
Breaking a Chain
If you have found a property to buy but your current home has not yet sold, a bridging loan can fund the purchase while you wait for your sale to complete. This allows you to act as a chain-free buyer, which can strengthen your negotiating position and reduce the risk of losing the property. At London prices, where a chain breaking down can be especially costly, this can be a valuable option — though it should be weighed carefully against the cost and risk. For more on the buying process when relocating or moving within London, see our moving to London guide.
Purchasing Unmortgageable Properties
Some properties are not mortgageable in their current condition — for example, properties without a functioning kitchen or bathroom, those with structural issues, or those with a short lease. Bridging finance can fund the purchase and any work needed to bring the property to a mortgageable standard, at which point you refinance onto a conventional mortgage.
In London, this can include period conversions requiring renovation, ex-local-authority flats, properties with short leases, and flats in buildings with unresolved cladding or external wall safety (EWS1) questions that prevent conventional lending until the position is resolved. For more on leasehold and cladding considerations, see our London leasehold guide.
Capital Raising
If you own property with equity and need fast access to funds — for example, to fund a business opportunity, complete a refurbishment, or release capital for a deposit on another property — a bridging loan secured against your existing property can provide this. Given the equity held in many London properties, capital raising against an existing property is a common use case in the capital.
Below-Market-Value and Probate Purchases
Properties offered below market value, whether through distressed sales, probate, or repossession, often require fast completion. Bridging finance allows you to secure the property quickly before arranging long-term funding.
Refurbishment and Development Exit
London’s active refurbishment and development market means bridging is frequently used to fund works on a property, or as a development exit facility — short-term finance that repays a development loan once a scheme completes and while units are sold or refinanced. These are typically unregulated facilities used by experienced investors and developers.
How Bridging Finance Works
Bridging loans are secured against property — either the property you are buying, a property you already own, or both. The lender’s primary concern is the security value and your exit strategy (how you will repay the loan), rather than your income in the traditional sense.
Interest on a bridging loan can be structured in several ways. With rolled-up interest, no monthly payments are made during the loan term — the interest is added to the loan and repaid at the end alongside the capital. With serviced interest, you make monthly interest payments during the term. Some lenders also offer retained interest, where the interest for the agreed term is deducted from the loan advance upfront.
Exit Strategies
Every bridging loan requires a clear and credible exit strategy — this is how you will repay the loan. Lenders will assess this before agreeing to lend. Common exit strategies include:
Sale of the property. The most straightforward exit. You sell the property (either the one you purchased or another property) and use the proceeds to repay the bridge.
Refinance onto a mortgage. You arrange a conventional mortgage on the property once it is in a mortgageable condition, and use the mortgage funds to repay the bridging loan. This is common for properties purchased at auction or those requiring renovation.
Sale of another asset. In some cases, the exit may come from the sale of a different property or asset, or from funds that are due to arrive (such as an inheritance or business sale).
A weak or unclear exit strategy is a common reason bridging applications are declined. Be realistic about your timeline and ensure your exit is achievable within the loan term. Because bridging is short-term, the main risk is timing. If the exit is delayed, interest continues to accrue and the lender may charge default interest or additional fees. Bridging should only be used with a realistic, documented exit plan and a contingency. If your exit is delayed or fails, costs can rise quickly and the lender may take steps to recover their money from the security property.
What Does Bridging Finance Cost?
Bridging finance is more expensive than a conventional mortgage. The main cost components are:
Interest rate. Often quoted as a monthly rate. Rates vary depending on the lender, the LTV, the property type, and the perceived risk. The headline rate is not the only factor — the overall cost depends on fees, term, and interest structure.
Arrangement fee. Most lenders charge an arrangement or facility fee, often calculated as a percentage of the loan amount. This is often payable on completion or added to the loan.
Valuation fee. The lender will require a valuation of the security property, and the cost depends on the property value and type. At higher London property values, valuation costs can be correspondingly higher.
Legal fees. You will need a solicitor, and the lender will also instruct their own legal representation. You often pay both sets of legal costs.
Exit fee. Some lenders charge an exit or redemption fee when the loan is repaid. Not all do, so this is worth checking upfront.
Because bridging finance is short-term and higher-cost, it is important to understand the total cost of the facility over the expected term, not just the headline interest rate. A broker can help you compare the total cost across lenders.
How Much Can You Borrow?
Maximum loan-to-value varies by lender, property type, condition, and exit strategy. Higher-risk or more complex cases may attract lower maximum borrowing levels. The maximum also depends on the property’s location and the borrower’s experience and exit strategy.
For properties that require significant work, the lender may base the LTV on the current value rather than the projected value after refurbishment, which can affect how much you can borrow. Maximum LTV varies by lender, property type, and exit, and may be lower for complex or higher-risk cases. At the higher facility sizes common in London, particularly for prime and higher-value properties, lender choice can narrow and the strength of the exit plan becomes even more important.
Regulated and Unregulated Bridging Finance
Some bridging loans are regulated by the Financial Conduct Authority. This is typically the case where the loan is secured on a property you, or an immediate family member, will occupy. Regulated bridging is subject to FCA rules on affordability, disclosure, and conduct. Whether a loan is regulated depends on the circumstances and should be confirmed at the outset.
A bridging loan is unregulated if it is secured against an investment property, commercial property, or a property that you do not intend to occupy. Most bridging loans used by investors and developers are unregulated, and unregulated borrowing does not carry the same protections as regulated lending.
Whether your bridging loan is regulated or unregulated affects which lenders can offer it, how the application is assessed, and the protections available to you. We can confirm which category applies to your situation before you proceed.
Bridging Finance in the London Market
Bridging finance is particularly relevant in London, where buyers often need to complete quickly, where a high proportion of stock is leasehold or affected by building-safety considerations, and where competition for certain properties is intense. It is commonly used for auction purchases, refurbishment projects, development exit, and short-term capital raising.
London has several features that make bridging relevant. The city has a very active auction market. A high proportion of London property is leasehold, and flats with short leases or unresolved cladding questions may not be mortgageable without remedial work or a lease extension first. Higher property values mean bridging facilities in London are often larger, which can narrow lender choice and increase the importance of the exit plan. The capital’s regeneration and refurbishment activity also generates demand for development and refurbishment bridging.
For landlords and investors, bridging can be a way to act quickly on opportunities where speed of completion matters. For homeowners, it can provide a solution to chain problems that might otherwise cause a sale to fall through. In all cases, the cost and risk mean bridging should be used with a clear plan rather than as a default option. For more on buy-to-let lending in London, see our buy-to-let lending in London guide.
Why We Wrote This Guide
Fitch & Fitch is an independent, whole-of-market mortgage broker with offices in Canary Wharf, Cambridge, and Colchester. We are an appointed representative of JLM Mortgage Network, authorised and regulated by the Financial Conduct Authority (FCA Registration Numbers 955014 and 300629). You can verify this on the FCA Register at register.fca.org.uk.
Fitch & Fitch has received recognition from independent industry bodies including the Mortgage Strategy Awards, Mortgage Introducer Awards, and Legal & General Mortgage Club Awards. These awards are judged independently and can be verified on the respective awards websites.
We wrote this guide because we believe an informed borrower makes better decisions. For further information about our London mortgage services, visit our London hub page.
Frequently Asked Questions
When can you use a bridging loan?
Bridging loans are used when you need to complete a property purchase or access funds faster than a conventional mortgage allows, or when the property is not currently mortgageable. Common uses include auction purchases, chain breaks, renovations, development exit, and capital raising.
Are bridging loans a good idea?
Bridging can be the right tool in specific situations — where speed is essential, where a property is not yet mortgageable, or where a chain is at risk — provided you have a clear, realistic exit strategy. It is more expensive than a conventional mortgage and carries the risk that costs rise if the exit is delayed. It is best suited to situations where the benefit of acting quickly outweighs the cost, and where the exit is well planned. It is not a substitute for long-term borrowing.
How much can I borrow from a bridging loan?
The amount depends on the property value, type, condition, and your exit strategy. Some lenders will go higher for experienced borrowers with strong exits. The lender will expect the security property value and proposed exit strategy to support the borrowing requested.
Can I get 100% bridging finance?
100% bridging — where the loan covers the entire purchase price with no deposit — is generally only available where additional security (such as another property) is provided to bring the overall loan-to-value within the lender’s limits. Standard bridging is capped at a percentage of the security value, so financing 100% of a purchase usually requires additional assets as security. A broker can explain what is realistic for your circumstances.
What are the negatives of bridging finance?
The main downsides are cost (interest rates and fees are higher than a mortgage), the risk of the exit strategy failing (which could mean defaulting on the loan), and the complexity of managing a short-term facility. Bridging finance should only be used when you have a clear and realistic plan to repay within the term.
How quickly can bridging finance be arranged?
Bridging finance can often complete more quickly than a conventional mortgage, although timescales vary depending on the valuation, legal work, and complexity of the case. Having your solicitor and exit plan ready in advance helps.
Can I use bridging finance to buy a home to live in?
Yes, but in that case the loan is likely to be regulated bridging, which means it is subject to FCA rules. This is common when breaking a chain — for example, buying your next home before your current one has sold.
Next Steps
If you are considering bridging finance for a property transaction in London, a useful first step can be understanding whether bridging is the most appropriate solution for your circumstances and, if so, how the exit strategy would work in practice.
For further information about our London mortgage services, visit our London hub page.
Related Guides
Buy-to-Let Mortgages in London
How Much Can I Borrow for a Mortgage in London?
The information above is for general guidance only and does not take account of your personal circumstances.