Want to Be Able to Move Fast in Today’s Property Market?
Whether it’s buying your dream home, an auction bargain, or a great deal that you need to move on before someone else does…
Every serious property investor knows that time is money in the property game.
There’s one problem with traditional mortgages though…
They can take months. Completion times of 6 to 8 weeks are not unusual.
And by the time your dream home comes back on the market…
You’re the second person to make an offer because you’ve missed your window.
What if there was another way though? A way to get property deals done quickly without having to wait weeks for a mortgage…
Bridging loans are transforming the way people buy property. 23% are used to prevent chain breaks, and the market is surging to record levels.
There’s a reason so many people are using them…
Speed isn’t the only benefit. Bridging also provides flexibility to make offers other buyers simply can’t match.
In This Guide:
- What Are Bridging Loans
- Types Of Bridging Loans
- When Do They Make Sense?
- How To Choose A Provider
- Real Costs
What Are Bridging Loans?
Bridging loans are a type of short-term financing. As the name suggests, they bridge the gap between buying and selling property.
They work by offering quick funding that is secured against a property – typically the one you are buying, or one you already own.
Instead of waiting months for a mortgage, you can have bridging finance in days or even hours.
The speed of these loans is part of the reason why bridging finance has been so popular recently. UK volumes hit a record £10.3 billion in 2024, up a massive 14.8% from 2023.
Property chains are getting longer and more complex. Auction purchases require lightning-fast funding.
Traditional mortgages are often too slow and cumbersome to be able to respond to these market changes.
There are companies that specialise in bridging finance for real estate purchases like Bridgeloandirect, and for a reason. These loans give property buyers the ability to act when other lending just doesn’t work.
Types Of Bridging Loans
There are multiple types of bridging loans available, each with different features designed for specific situations.
Choosing the wrong one could easily cost you thousands of pounds, so it’s worth understanding them first:
Closed Bridge Loans
These have a guaranteed exit route (such as selling a property or remortgaging) by the time you repay.
They will have lower interest rates due to lower risk to the lender.
Open Bridge Loans
These have no fixed date of repayment and therefore have higher interest rates.
First Charge vs Second Charge
First charge loans are the primary security against a property. Second charge loans sit behind an existing mortgage.
Regulated vs Unregulated
If buying a property to live in you’ll need a regulated bridging loan. Unregulated is more common for investment property purchases.
When Do They Make Sense?
Bridging loans are not for every property situation.
When they are appropriate though, they can be game-changers.
These are the scenarios where a bridging loan will make your life significantly easier:
Property Auctions
Purchases at auction require completion within 28 days. It is extremely difficult, if not impossible, to get a mortgage for a property this fast.
Bridging finance allows you to bid in auctions knowing that if you win you’ll actually be able to complete the purchase.
Chain Breaks
This is when your dream property comes up for sale just as your existing home hasn’t yet sold.
Without bridging finance, you’ll have no choice but to lose the property.
With bridging, you can purchase the property, and then later sell your existing home.
Property Development
You might want to buy a property that needs significant renovation or conversion works.
Most mainstream lenders will not touch a property that needs this type of work.
Bridging loans are for this type of purchase. Buy, renovate, then refinance with a traditional mortgage, or sell on.
Speed Critical Deals
Whether it’s a probate sale, a distressed seller, or simply a very competitive market with lots of cash buyers.
Bridging loans have become necessary tools for anyone serious about property investment or navigating today’s property market.
How To Choose A Provider
Here’s the one area where most people go wrong…
They focus solely on interest rates.
Rates are important, of course. But they are far from the only consideration.
Choosing a bridging loan provider is all about:
Speed Of Decision
How quickly can you get a decision? Can the lender give you one in 24 hours or will it take weeks?
Speed can be far more important than saving 0.1% on the interest rate in certain situations.
Total Cost Structure
Look beyond the headline interest rate and consider the whole cost structure.
Arrangement fees, valuation costs, legal fees, early repayment charges. All of this adds up.
Reputation And Service
When you are working to a short timescale, you need a lender who actually answers the phone and returns your calls quickly.
Deadlines are unforgiving and poor service can kill a deal faster than anything.
Real Costs
Money.
Let’s talk money. Bridging loans are more expensive than traditional mortgages. They are not as expensive as missing out on a great property though.
Typical costs associated with bridging loans are:
Interest Rates
Rates are higher than traditional mortgages. You can expect 0.4% to 2% per month.
That equates to roughly 5% to 24% per annum.
Arrangement Fees
These are typically 1-2% of the loan amount. It can be higher for more complex deals.
Legal And Valuation Costs
Budget £1,500-£3,000 for legal work and valuations on the property.
Early Repayment Charges
Many bridging loans come with minimum interest periods of 1-3 months.
This means even if you repay early, you’ll still be charged the minimum.
Key point – factor all these costs into your overall deal analysis. Bridging loan costs can be £5,000-£10,000 for a six-month period on a typical residential property deal.
Is that money well spent? If that loan allows you to secure a property that you would otherwise lose, or prevent a chain collapse that costs you your dream home, it absolutely is.
Moving Forward
Bridging loans are no panacea. They are not the solution to every property problem you might face…
They are very powerful tools though, which can significantly simplify your property purchases when used correctly.
When looking to use bridging finance…
Make sure you have a clear exit strategy before you commit to a loan.
How will you repay it? Sell another property, secure a traditional mortgage, or sell the property you’re buying.
Whatever it is, know the answer in advance.
Factor in the total costs against the opportunity you are capturing. £8,000 in bridging costs might well be worth it to secure a property that will save you £20,000 on another deal.
Work with experienced professionals. Bridging is a specialist form of lending.
Wrapping It Up
Bridging loans are surging in popularity for good reason. Property transactions are becoming more complex, competitive, and time-sensitive than ever before.
If you’re an experienced property investor, or even a first time buyer in a tricky purchase, bridging finance provides solutions that traditional mortgages cannot match.
Costs are higher, yes. But the opportunities they unlock more than justify the expense.
Don’t let the perfect property deal slip away because you were tied to a traditional mortgage lender.
In today’s property market, speed and flexibility are often more important than saving a few percentage points on an interest rate.
Bridging loans provide both when you need them most.