A bridging loan is short-term finance secured on property. It can provide funding until a planned event, such as a sale or refinance, provides the money to repay it. Completion depends on lender checks, valuation and legal work. Expert Mortgage Brokers in Limehouse, East London arranges bridging finance for homeowners and property investors. This guide explains the process, costs and risks.
What is a bridging loan?
A bridging loan is a loan that bridges a gap. You need money now, and you expect money later. The loan covers the time in between.
The lender takes a legal charge over the property. Terms are usually measured in months. Rates are often quoted monthly; interest may be paid monthly, retained from the advance or added to the balance. The capital is generally repaid in a lump sum by the agreed deadline. Check the offer for calculation methods, compounding and early-repayment terms.
Who uses bridging loans?
Bridging finance may be considered where short-term funding is needed and a credible repayment route is available. Possible uses include:
- Buying at auction. Some traditional auctions require completion within 20 business days, but the legal pack and special conditions determine the deadline.
- Buying before you sell your current home.
- Buying a property that does not currently meet a conventional mortgage lender’s criteria, subject to the bridging lender accepting it.
- Funding eligible refurbishment works, with a planned sale or refinance to repay the loan. Refinancing is not guaranteed.
Raising cash against a property you already own for a short period.
How does a bridging loan work, step by step?
A typical application follows these seven stages, although the process varies by lender and transaction.
- You explain the plan. You tell your broker what you are buying or raising money for, and how you will repay.
- The broker finds lenders. Lenders differ in what they accept. A broker identifies potential options, subject to lender assessment.
- You get terms. The lender gives an indication of the loan size, rate, fees and term.
- The lender values the property. The lender obtains an acceptable valuation. The method and valuation assumptions depend on the property and lender.
- Lawyers check the title. The lender’s solicitor checks ownership and prepares the charge. This can take days or weeks.
- The loan is offered and funds are released. Funds are released once the offer conditions and legal requirements are satisfied, normally through the solicitors handling the transaction.
- You repay at the end. You repay the amount due by the agreed deadline. The legal charge is discharged once the secured obligations have been settled.
Our guide to how long a bridging loan takes shows what slows each step down.
What do bridging lenders assess?
Lenders consider the repayment strategy, security and borrower together. There is no universal order of assessment.
- The exit. How will you repay? A sale, a refinance or another source of funds.
- The property. Is it worth enough, and could the lender sell it if it had to?
- You. Your finances, credit history and relevant experience are assessed according to the lender’s criteria.
A credible exit is important, but it does not replace assessment of the borrower or guarantee approval. Requirements vary by lender, product and regulatory status. Where interest is paid monthly, the lender will also consider how those payments will be met.
What is the difference between gross and net loan?
The gross loan is the headline figure. The net loan is the cash that reaches you after fees and any retained interest are taken out. Always ask for the net figure.
Here is one example loan, followed from start to end. It is illustrative only. The rate and fee are invented, and they are not current lender pricing or a quote.
You borrow £200,000 for 6 months at 0.9% a month, with a 2% arrangement fee. Interest is retained, which means it is taken from the loan on day one. Valuation and legal costs are paid separately and are not included.
| Step | Figure |
| Gross loan | £200,000 |
| Arrangement fee (2%) | £4,000 |
| Retained interest (0.9% × 6 months) | £10,800 |
| Net cash you receive | £185,200 |
| You repay at month 6 | £200,000 |
You pay back £200,000 and you only received £185,200. If you need £200,000 in your hands, the gross loan has to be larger. Our guide to retained vs rolled up interest (link to post 9 once live) compares the three ways of paying interest.
Please note: Arrangement fees, interest rates and other charges may vary between lenders and loan products. The figures above are illustrative only and may differ from the terms offered to you. Always check the lender’s latest terms and confirm all fees and costs before proceeding.
What is the difference between a first charge and a second charge?
A first charge loan ranks first in line if the property is sold. It is used when there is no other mortgage on the property, or when an existing mortgage is repaid. A second charge loan sits behind an existing mortgage. Read more on our pages for first charge and second charge bridging loans.
Second charge bridging can be more expensive because the lender ranks behind the first lender, but pricing varies. Existing mortgage terms or title restrictions may require the first lender’s consent. Have this checked before committing to costs.
What is the difference between open and closed bridging loans?
A closed bridge typically has a more certain expected exit date, such as completion of a sale after exchange of contracts. With an open bridge, the expected exit timing is less certain. Open bridging does not mean indefinite borrowing: check the repayment obligations and any final deadline in the loan agreement.
A more certain exit may support the application, but it does not guarantee approval, a lower price or successful repayment. The agreed terms and evidence supporting the exit matter more than the label.
How much can you borrow?
Loan-to-value, or LTV, compares borrowing with the lender’s accepted property value. Limits depend on the lender, property, works and charge ranking. Ask whether the quoted LTV uses the gross facility or net advance and how existing secured borrowing is included. Available equity alone does not establish eligibility.
Are bridging loans regulated?
Some bridging loans are regulated mortgage contracts; others are not. The position depends on the borrower, property use, purpose and structure of the borrowing, and applicable exclusions. Borrowing secured on a home occupied, or intended to be occupied, by the borrower or a related person can be regulated. EMB will explain the status of the proposed arrangement. FCA authorisation of a firm does not mean every loan it arranges is regulated.
What are the risks?
A sale may fall through, refinancing may be unavailable or insufficient, and works may overrun. An extension requires the lender’s agreement and is not guaranteed. Delays may lead to additional interest, charges or enforcement under the agreement. Property used as security may be repossessed and a debt may remain if sale proceeds are insufficient. Contact the lender promptly if repayment is at risk. Consider alternatives, including waiting for a sale or conventional mortgage finance where suitable.
How does Expert Mortgage Brokers arrange bridging loans?
Expert Mortgage Brokers in Limehouse, East London helps homeowners, property investors and developers explore bridging finance in Tower Hamlets, Canary Wharf, Newham and across the UK. We review your proposed exit, explain the net advance and costs, and discuss whether bridging or another route could suit your circumstances. EMB acts as a broker, not a lender.
Speak to Jahed Mirza, CeMAP, on 020 7183 1119 to discuss your plans. Ask about any broker fees and when they become payable before proceeding.
Frequently asked questions
A short-term loan secured on property. It covers a gap until you sell, refinance or receive other funds.
The lender sets the term and repayment obligations. Allow time for delays in your planned exit and check any final repayment deadline before committing.
The capital is generally repaid in a lump sum by the agreed deadline, usually using a sale, refinance or other agreed funds. Interest may be paid monthly, rolled up or retained. Early repayment and minimum-interest terms vary.
Credit history remains relevant. Some lenders consider applicants with adverse credit, but approval and terms depend on the full application, including the property, repayment strategy and borrower’s circumstances.
If the loan is secured on your home and you do not repay, the lender can enforce its security. That can include repossession.
This guide is general information, not personal advice. Property used as security may be repossessed if the loan is not repaid. Expert Mortgage Brokers is a trading name of LQ Property Finance Limited (company number 10344069). FCA reference number: 758816. Not all bridging finance is regulated by the Financial Conduct Authority. Registered office: 162 Goodmayes Lane, Ilford, IG3 9PR. Trading address: 558 Commercial Road, Limehouse, London E14 7JD. EMB acts as a broker, not a lender. Fees may apply and will be explained before you proceed.
Sources: FCA Handbook, PERG 4.4 | Common Auction Condition
