What Is Bridging Finance?

Bridging finance (also called bridging loans) is a short-term secured loan, typically lasting from 1 day to 36 months, used to “bridge” a temporary funding gap in property transactions. Unlike traditional mortgages that can take 8-16 weeks to complete, bridging loans can be arranged in 1-6 weeks, making them ideal for time-sensitive property purchases.

Bridging loans are secured against property (residential, commercial, land, or development sites) and are designed to be repaid quickly – usually through the sale of the property, refinancing onto a mortgage, or from other funds becoming available.

Key characteristics:

• Short-term:1 day to 36 months (most commonly 6-12 months)
• Secured:Against residential or commercial property, land, or other valuable assets
• Fast:Decisions in 24-48 hours, funds in 1-6 weeks
• Interest-only:Monthly interest payments or rolled up until exit
• Flexible:Can be used for almost any property-related purpose
• Exit-focused:Lenders must see a clear repayment strategy

How Does Bridging Finance Work?

Step 1: Identify Your Need

You need short-term funding for a property transaction – auction purchase, resolve a chain break, refurbishment, Below Market Value (BMV) opportunity, or for any business purpose.

Step 2: Initial Consultation

We discuss your situation, the property, your exit strategy, and loan amount needed. We’ll assess whether bridging finance is the right solution or if a mortgage or development finance would be more suitable.

Step 3: Lender Selection

We’ll identify the most suitable lenders from our panel based on your property type, loan amount, loan-to-value (LTV), credit profile, and exit strategy.

Step 4: Application Submitted

We will submit your application with supporting documents (property details, valuation (if one has already been done), proof of exit strategy, ID, proof of funds for any deposit).

Step 5: Valuation & Legal Work

The lender arranges a property valuation (1-5 days) and instructs solicitors to handle legal work. You can use your own solicitor or the lender’s panel solicitor.

Step 6: Offer & Completion

Once the valuation is acceptable and legal work is complete, the lender issues a formal offer. Funds are released to your solicitor, typically 1-6 weeks from application (sometimes faster for urgent cases).

Step 7: Exit

You repay the loan through your planned exit strategy – property sale, remortgage onto a commercial mortgage or buy-to-let mortgage, refinance, or other funds.

Types of Bridging Finance

Regulated vs. Unregulated Bridging Loans

Regulated bridging loans are regulated by the Financial Conduct Authority (FCA) and apply when:

• The property is residential
• You (or a family member) will live in the property

Please note that the max term for a regulated bridge is 12 months

Unregulated bridging loans are not FCA-regulated and apply when:

• The property is for investment purposes (buy-to-let, commercial, development)
• The property iscommercial, semi-commercial, land for development or residential property solely for investment purposes
• The loan is for business purposes

Most bridging loans are unregulated because they’re used for investment or business purposes.

1st Charge vs. 2nd Charge Bridging Loans

1st charge bridging loan: The bridging lender takes the primary charge over the property. If there’s no existing mortgage, this is always a 1st charge loan.

2nd charge bridging loan: The bridging lender takes a secondary charge behind an existing mortgage. This is riskier for the lender, so interest rates are higher and LTVs are lower.

Example: You own a property worth £500,000 with a £200,000 mortgage (40% LTV). You need £100,000 for a business opportunity. A 2nd charge bridging loan of £100,000 sits behind the existing £200,000 mortgage, bringing total borrowing to £300,000 (60% LTV).

Open vs. Closed Bridging Loans

Closed bridging: You have a fixed repayment date (e.g., property sale completion date is confirmed). Lower interest rates because the lender knows exactly when they’ll be repaid.

Open bridging: No fixed repayment date, but you must repay within the maximum term (usually 12 months). Higher interest rates due to uncertainty.

Serviced vs. Retained vs. Rolled-Up Interest

One of the most important decisions when taking out a bridging loan is how you’ll pay the interest. There are three main options:

Serviced Interest (Monthly Payments)

You pay the interest monthly throughout the loan term, just like a traditional interest only mortgage. The loan balance stays the same, and you only repay the capital at the end.

Best for:

• Borrowers with regular monthly income or cash flow
• Investors who want to protect their equity
• Longer-term bridging loans (12+ months)

Example:

• Loan: £200,000 at 0.75% per month
• Monthly interest payment: £1,500
• Total interest over 12 months: £18,000
• Amount to repay at end: £200,000 (capital only)

Advantages:

• Loan balance doesn’t grow
• Lower total interest cost
• Protects your equity in the property

Disadvantages:

• Requires monthly cash flow
• Higher monthly commitment

Retained Interest (Pre-Funded)

The lender holds back enough money from the loan to cover all interest payments for the agreed term. Each month, the lender deducts the interest from this retained amount. You receive less money upfront, but you have no monthly payments to make.

Best for:

• Refurbishment projects where you need all your cash for building work
• Borrowers with no monthly income during the loan term

Example:

• Gross Loan(total facility which you have to repay back): £200,000 at 0.75% per month for 6 months
• Total interest: £9,000
• Lender retains: £9,000
• Net Loan (amount you receive): £191,000
• Monthly payments: £0
• Amount to repay at end: £200,000 (capital only)

Advantages:

• No monthly payments required
• Interest cost is fixed and known upfront
• Easier to budget and plan

Disadvantages:

• You receive less money upfronton Day 1 as the interest has been deducted from the gross loan facility
• If you repay early, you may not get the unused retained interest back (depends on lender)
• Slightly higher effective cost than serviced interest

Rolled-Up Interest (Compounded)

Interest is added to the loan balance each month and repaid at the end along with the capital. The loan balance grows each month as interest compounds. No monthly payments and no money held back.

Best for:

• Situations where you need maximum funds upfront
• Borrowers confident of a quick exit

Example:

• Loan: £200,000 at 0.75% per month for 6 months
• Month 1 interest: £1,500 (balance becomes £201,500)
• Month 2 interest: £1,511 (balance becomes £203,011)
• Month 3 interest: £1,523 (balance becomes £204,534)
• Month 4 interest: £1,534 (balance becomes £206,068)
• Month 5 interest: £1,546 (balance becomes £207,614)
• Month 6 interest: £1,557 (balance becomes £209,171)
• Total interest: £9,171
• Amount to repay at end: £209,171

Advantages:

• No monthly payments
• You receive the full loan amount upfront
• Maximum flexibility

Disadvantages:

• Interest compounds, so total cost is higher
• Loan balance grows each month
• Reduces your equity in the property
• Can be expensive if the loan runs longer than expected
• The total gross loan amount (loan plus interest costs) must be within the lender’s LTV limits which is normally 75% LTV

Which Interest Option Should You Choose?

Choose serviced interest if:

• You have monthly income or rental income from the property
• You want to minimise total interest costs
• You’re planning a longer-term loan (12+ months)
• You want to protect your equity
• Most importantly, you have the cash flow to service the monthly interest payments

Choose retained interest if:

• You need all your cash for refurbishment or other purposes
• You have no monthly income during the loan term
• You want certainty and no monthly obligations

Choose rolled-up interest if:

• You need maximum funds upfront
• You’re confident of a very quick exit (1-3 months)
• You have no monthly cash flow and can’t afford to have interest retained
• You understand the compounding cost

Important: Some lenders only offer certain interest options, and the choice may affect your interest rate. Serviced interest often attracts the lowest rates, while rolled-up and retained interest typically has slightly higher rates due to the increased risk to the lender.

Common Uses for Bridging Finance

Property Auctions

Auction purchases require completion within 28 days (sometimes 20 days). Traditional mortgages take 8-16 weeks. Bridging finance can complete in 1-6 weeks, making it the only realistic option for auction purchases.

Example: You win a property at auction in Edinburgh for £180,000. The property needs £30,000 of refurbishment work. You have £75,000 cash available. A bridging loan of £135,000 (75% LTV on the £180,000 property value) provides the funds within 4 weeks. You refurbish the property over 6 months (final value £280,000), then remortgage onto a buy-to-let mortgage at 75% LTV (£210,000), repaying the bridging loan and releasing £75,000 equity which can be used to for the next project.

Chain Breaks

You’ve found your dream home, but your current property hasn’t sold yet. A bridging loan lets you purchase the new property immediately, using your existing property as security. When your old property sells, you repay the bridging loan.

Example: You’re buying a house in Aberdeen for £350,000, but your current house (worth £400,000, no mortgage) hasn’t sold. A bridging loan of £300,000 (75% of your existing property value) secured against your current property provides the funds to purchase the new house (£300,000 plus your savings covering the £50,000 towards the purchase as well as all covering all the costs related to this purchase). When your old house sells 4 months later for £400,000, you repay the bridging loan and use the remaining equity as you wish.

Refurbishment & Unmortgageable Properties

Properties requiring significant refurbishment are often unmortgageable – no mainstream lender will provide a mortgage until the work is complete. Bridging finance lets you buy the property and fund the refurbishment, then remortgage once the work is done.

Example: You find a dilapidated flat in Glasgow for £80,000 (worth £150,000 after refurbishment). You need £60,000 total (£40,000 for the purchase + £20,000 to fund the refurbishment). You have £40,000 cash available. A bridging loan of £60,000 (75% LTV of the property) provides the required funds to purchase the property and fund the refurbishment works. You complete the refurbishment over 8 months, then remortgage onto a buy-to-let mortgage at £150,000 valuation (75% LTV = £112,500), repaying the £60,000 bridging loan and releasing £52,500 equity.

Below Market Value (BMV) Purchases

You’ve negotiated a property purchase significantly below market value, but the seller wants a fast completion (7-14 days). Bridging finance lets you move quickly to secure the deal.

Example: You negotiate a property purchase at £200,000 (market value £280,000). The seller wants completion in 10 days. You have £50,000 cash. A bridging loan of £150,000 (75% LTV on the £200,000 purchase price) completes in 8 days. You hold the property for 6 months, then remortgage onto a buy-to-let mortgage at 75% LTV on the £280,000 market value (£210,000), repaying the bridging loan and releasing £60,000 equity.

Development Projects

Bridging finance can fund land purchases, planning applications, or small development projects before refinancing onto development finance or selling the completed units.

Business Purposes

Raise funds quickly for business opportunities, stock purchases, tax bills, or buying out business partners by securing a bridging loan against property you own.

Example: You need £75,000 to buy out a business partner. You own a commercial property worth £400,000 with no mortgage. A bridging loan of £75,000 (19% LTV) secured against the property provides the funds within 6 weeks. You repay the loan 3 months later when you refinance onto a commercial mortgage.

Property Types We Can Finance

Residential Property

Houses, flats, bungalows – whether owner-occupied or investment properties. LTVs typically up to 75% (sometimes 80% for strong cases).

Commercial Property

Offices, retail shops, warehouses, industrial units. LTVs typically up to 70%.

Semi-Commercial Property

Mixed-use properties (e.g., shop with flat above, pub with accommodation). LTVs typically up to 65-70%.

Houses in Multiple Occupation (HMOs)

Properties with multiple tenants. LTVs typically up to 70%.

Multi-Unit Freehold Block (MUFB)

A single property with multiple self-contained residential units under one freehold title. LTVs typically up to 70%.

Land & Development Sites

Residential or commercial development land, with or without planning permission. LTVs typically 50-65% depending on planning status.

Unusual Security

Some specialist lenders will consider other valuable assets as security:

• Luxury vehicles (high-value cars, classic cars)
• Fine art and antiques
• Jewellery and watches
• Other high-value assets

LTVs on unusual security are typically much lower (30-50%) and interest rates are higher due to increased risk.

How Much Can I Borrow?

Loan Amounts

• Minimum:£10,000 (some lenders)
• Maximum:£20,000,000+ (for large commercial or development projects) (subject to property value)
• Most common:£50,000 to £2,000,000

Loan-to-Value (LTV) Ratios

• Residential property:Up to 75% LTV (sometimes 80%)
• Commercial property:Up to 70% LTV
• Semi-commercial property:Up to 65-70% LTV
• Land with planning:Up to 65% LTV
• Land without planning:Up to 50% LTV
• HMOs:Up to 70% LTV
• MUFBs: Up to 70% LTV
• Unusual security:Up to 30-50% LTV

LTV Example:

• Property value: £400,000
• Maximum LTV: 75%
• Maximum loan: £300,000
• Your deposit/equity required: £100,000

Important: LTV is calculated on the current property value. However different lenders base their lending on different valutions such as market value, vacant possession value, 180 day vacant possession value, 180 day value and 90 day value.

Bridging Finance Costs

Bridging loans are more expensive than mortgages because they’re short-term, higher-risk, and provide speed and flexibility. Here’s what you’ll pay:

Interest Rates

• Typical range:5% to 1.5% per month
• Annual equivalent:6% to 18% per year

Interest rates depend on:

• LTV (lower LTV = lower rate)
• Property type (residential cheaper than commercial)
• Credit profile (clean credit = lower rate)
• Loan size (larger loans often get better rates)
• Exit strategy (clear exit = lower rate)
• Interest payment method (serviced usually cheaper than rolled-up)

Arrangement Fees

• Typical range:1% to 2% of loan amount
• Example:£200,000 loan at 2% arrangement fee = £4,000 fee

Valuation Fees

Typical range: £300 to £3,000+ depending on property value and complexity. The standard process is that the lender will put the survey out to tender and a number of surveyors with respond with a quote. The lender will then contact the borrower and provide them with suitable options for the borrower to select their preferred option.

Legal Fees

Typical range: £750 to £2,500+ for lender’s solicitor fees (you may also have your own solicitor fees)

Exit Fees

Some lenders charge an exit fee (typically 1% of loan amount) when you repay the loan.

Broker Fees

At Capital 8 Finance we charge a 1% broker fee on completion of the loan. So for example if you borrowed £200,000, we would charge you £2,000.

Real Cost Example 1: Small Bridging Loan

• Property value:£150,000
• Your deposit/equity:£37,500 (25%)
• Loan amount:£112,500 (75% LTV)
• Interest rate:75% per month (9% annually)
• Term:6 months
• Arrangement fee:2% (£2,250)
• Interest payment:Serviced (monthly payments)
• Total costs:Interest: £112,500 × 0.75% × 6 months = £5,063+ Arrangement fee: £2,250 + Valuation: £500 + Legal fees: £1,200 + Broker fees: £1,125
• Total cost: £10,138
• Monthly cost:£844 interest (if paid monthly)

Real Cost Example 2: Larger Bridging Loan

• Property value:£1,000,000
• Your deposit/equity:£250,000 (25%)
• Loan amount:£750,000 (75% LTV)
• Interest rate:65% per month (7.8% annually)
• Term:12 months
• Arrangement fee:5% (£11,250)
• Interest payment:Serviced (monthly payments)
• Total costs:Interest: £750,000 × 0.65% × 12 months = £58,500+ Arrangement fee: £11,250 + Valuation: £1,500 + Legal fees: £2,000 + Broker fee: £7,500
• Total cost: £80,750
• Monthly cost:£4,875 interest (if paid monthly)

Loan Terms & Repayment

Typical terms: 1 month to 36 months

Most common: 6-12 months

Minimum: Some lenders offer very short terms (1 day to 1 week) for specific situations

Maximum: Some specialist lenders offer up to 36 months

Repayment structure: Interest-only during the term, with capital repaid at the end through your exit strategy.

Exit strategies lenders accept:

• Sale of the property securing the loan
• Sale of another property
• Remortgage onto a commercial mortgage or buy-to-let mortgage
• Refinance onto development finance
• Cash injection from business profits or other sources
• Inheritance or other confirmed funds

Critical: Lenders will not approve a bridging loan without a clear, credible exit strategy. “I’ll figure it out later” is not acceptable.

Eligibility Criteria

Minimum Requirements

Property value: Typically £50,000+ (some lenders accept lower values)

Loan amount: £10,000 minimum (varies by lender)

Exit strategy: Clear, credible repayment plan

Age: 18+ (some lenders have maximum age limits, typically 70-85)

UK resident: Most lenders require UK residency (some accept expats)

You May Still Qualify Even If:

• You have adverse credit (CCJs, defaults, missed payments, bankruptcy)
• You’re a new property investor with limited experience
• The property is unmortgageable or in poor condition
• You’re self-employed with complex income
• You’ve been declined by mainstream mortgage lenders
• You have existing bridging loans or development finance

Documentation Required

• Property details (address, description, valuation estimate)
• Proof of exit strategy (sale agreement, mortgage in principle, evidence of funds)
• Personal ID (passport or driving licence)
• Proof of address (utility bill, bank statement)
• Bank statements (last 3 months)
• Credit report (we can obtain this)
• Proof of deposit/funds (if purchasing)
• Details of existing mortgages or loans

Bridging Finance vs. Commercial Mortgage

Feature	Bridging Finance	Commercial Mortgage
Term	1-36 months	5-25 years
Speed	1-6 weeks	8-16 weeks
Interest Rate	0.5-1.5% per month (6-18% annually)	6-9% annually
Arrangement Fee	1-2%	0-2%
Best For	Urgent purchases, auctions, unmortgageable properties, refurbs	Long-term property investment, owner-occupied premises
Exit Strategy	Required	Not required
Credit Requirements	Flexible	Good-excellent credit preferred
Property Condition	Any condition accepted	Must be mortgageable

Choose bridging if: You need speed (auction, chain break), the property is unmortgageable, or you need short-term funding before refinancing.

Choose a commercial mortgage if: You’re buying for long-term investment or owner-occupation, the property is mortgageable, and you can wait 8-16 weeks.

Speed of Funding

Decision in principle: 24-48 hours (sometimes same day)

Valuation: 1-5 days (however it could take a couple of weeks for the report to be completed for the lender)

Legal work: 1-2 weeks

Funds released:Typically 1-6 weeks from application

Fastest cases: Urgent auction completions can sometimes be funded in 7-10 days if all documentation is ready and the property is straightforward.

Typical timeline: 1-6 weeks for most standard cases.

Lender Access

I work with a comprehensive panel of bridging finance lenders, including:

Specialist bridging lenders:United Trust Bank, Together Money, MT Finance, Precise Mortgages, Roma Finance, West One Loans, LendInvest, Ultimate Finance

Challenger banks:Aldermore, Shawbrook Bank, Hampshire Trust Bank

Private lenders and boutique lenders:For complex cases, high-net-worth clients, or unusual security

This whole-of-market access means I can find you the most competitive rates and terms, and match you with lenders who specialise in your specific property type or situation.

Why Choose Capital 8 Finance?

I’ve Been on Your Side of the Table

Having purchased commercial property myself for my hospitality business, I understand the urgency and complexity of property transactions. I know what it’s like to need funding quickly, and I know when bridging finance is the right solution versus when a commercial mortgage would be more cost-effective.

I’ll Tell You If Bridging Isn’t the Right Choice

If a commercial mortgage, development finance, or another product would be cheaper and more suitable, I’ll tell you. My priority is finding you the most cost-effective solution.

Scotland-Based, UK-Wide Service

Based in Dundee, I serve property investors, developers, and homeowners across Scotland and throughout the UK. I understand the Scottish property market and have completed bridging cases across Scotland, England and Wales.

Fast, Personal Service

As a solo operator, you deal directly with me throughout the entire process. I’ll respond to your enquiry within 24 hours, provide you with options within 48 hours, and keep you updated at every stage.

Whole-of-Market Access

I’m not tied to any single lender, which means I can find you the best rates and terms from multiple specialist bridging lenders – including lenders you wouldn’t find on your own.

How to Apply for Bridging Finance

Step 1: Contact me with details of your property, loan amount needed, and exit strategy (call, email, or online enquiry).

Step 2: Initial consultation (15-30 minutes) – I’ll assess your situation and confirm whether bridging finance is suitable.

Step 3: Lender selection – I’ll identify the most suitable lenders and provide you with indicative terms (interest rate, fees, LTV).

Step 4: Application – Once you’re happy to proceed, I’ll submit your application and gather required documents.

Step 5: Valuation & legal work – The lender arranges valuation and instructs solicitors.

Step 6: Offer & completion – Formal offer issued, legal work completed, funds released (typically 4-6 weeks from application).

Ready to explore your bridging finance options? Contact Capital 8 Finance today for your free consultation.

Frequently Asked Questions

What’s the difference between bridging finance and a mortgage?

Bridging finance is short-term (1-36 months), more expensive (0.5-1.5% per month), and much faster (1-4 weeks). Mortgages are long-term (5-25 years), cheaper (6-9% annually), but slower (8-16 weeks).

How quickly can I get bridging finance?

Decisions in principle within 24-48 hours. Funds typically available in 4-6 weeks, sometimes faster for urgent cases.

Can I get bridging finance with bad credit?

Possibly. Bridging lenders are more flexible than mortgage lenders and focus more on property value, LTV, and exit strategy than credit scores. Some adverse credit is often accepted, though it may affect interest rates.

Do I need a deposit for bridging finance?

Yes, typically 25-50% depending on property type and LTV. For example, at 75% LTV, you need a 25% deposit.

What happens if I can’t repay the bridging loan?

If you can’t repay through your planned exit strategy, you must find an alternative exit (sell the property, refinance, inject cash from other sources). If you default, the lender can repossess and sell the property to recover the debt.

Can I use bridging finance to buy at auction?

Yes, this is one of the most common uses. Bridging finance can complete within the 28-day auction deadline, whereas mortgages cannot.

What’s an exit strategy?

Your plan for repaying the bridging loan – typically through property sale, remortgage, refinance, or other confirmed funds. Lenders will not approve a loan without a clear exit strategy.

Can I get bridging finance for a property that needs refurbishment?

Yes, bridging finance is ideal for unmortgageable properties requiring refurbishment. You can fund both the purchase and the refurbishment, then remortgage once the work is complete.

What’s the maximum loan-to-value (LTV) for bridging finance?

Typically 75% for residential property, 70% for commercial, 65-70% for semi-commercial, and 50-65% for land. Higher LTVs may be available for strong cases. 100% is possible with additional security.

What’s the difference between serviced, retained, and rolled-up interest?

Serviced means you pay interest monthly. Retained means the lender holds back money to cover interest (no monthly payments). Rolled-up means interest is added to the loan balance each month (no monthly payments, but the debt grows).

Can I get bridging finance if I’m self-employed?

Yes, bridging lenders are very flexible with income verification. They focus more on property value and exit strategy than employment status.

What’s a 1st charge vs. 2nd charge bridging loan?

1st charge means the bridging lender has primary security over the property. 2nd charge means they’re behind an existing mortgage. 2nd charge loans have higher rates and lower LTVs.

Can I get bridging finance for commercial property?

Yes, bridging finance is available for offices, retail shops, warehouses, industrial units, and other commercial properties.

What fees do I pay for bridging finance?

Interest (0.5-1.5% per month), arrangement fee (1-2%), valuation fee (£300-£3,000+), legal fees (£750-£2,500+), and possibly an exit fee (1%).

How long does bridging finance last?

Typically 1-24 months. Most loans are 6-12 months. You can repay earlier without penalty (though the arrangement fee is not refunded).

Can I extend a bridging loan if I need more time?

Possibly, if your exit strategy is still credible and the lender agrees. Extensions typically incur additional fees and may have higher interest rates.

What’s regulated vs. unregulated bridging finance?Regulated bridging applies when the property is residential and you (or family) will live in it. Unregulated applies for investment properties, commercial properties, or business purposes. Most bridging loans are unregulated.

Can I use bridging finance to break a property chain?Yes, this is a very common use. You can bridge the gap between buying your new home and selling your current one.

What property types can I use as security?

Residential, commercial, semi-commercial, land, HMOs, MUFBs, and even unusual security like luxury cars, fine art, and jewellery (with specialist lenders).

Do I need a solicitor for bridging finance?

Yes, legal work is required. You can use your own solicitor or the lender’s panel solicitor. Legal fees typically range from £750 to £2,500+.

Do you charge a broker fee?

Yes, at Capital 8 Finance we charge a 1% broker fee on completion of the loan. We do not charge any upfront fees, so if we are unable source the funding you require, we do not charge you a penny.