Bridging Finance

A bridging loan is a form of short-term finance secured on a property that can help to bridge a financial gap.

Unlike typical mortgages, bridging loans don’t always depend on income or credit history and they can be arranged quickly if speed is important – often within a few weeks and sometimes in as little as a few days. A bridging loan is designed to be arranged much quicker than a standard mortgage and usually credit-backed terms can be produced within 4–5 hours. As the interest is usually retained or rolled, there is no need to review affordability evidence or to calculate an affordability assessment for monthly payments. In many scenarios a desktop valuation can be used instead of a physical valuation – these aspects enable lenders to underwrite quickly and allow them to instruct solicitors very early on in the transaction.

Bridging Loans can be used for a variety of reasons, such as purchasing an investment property, waiting for planning approval, carrying out refurbishments or refinancing an existing development facility. 

A bridging loan usually has a maximum LTV of 75%, which means a customer must be looking to borrow less than 75% of their property’s value. To increase borrowing, a borrower may be able to use the equity they have in other assets to offer additional security. Using multiple properties as security can enable borrowing of up to 100% of a property’s value.

The average term for a bridging loan is approximately 10 months, although some lenders offer longer terms depending on the borrower’s circumstances. 

Bridging loans can be defined as open or closed. The majority of bridging loans are on an open basis, where the borrower sets out a proposed exit plan to repay their loan but there is no definite date. An open bridge loan can be repaid whenever funds become available. However, there will be a clear cut-off point by which the loan has to be repaid, for example within 12 months.