Bridging Finance: the complete guide from a specialist broker

Bridging finance is short-term property lending, secured against property, arranged in days or weeks rather than months. It exists to solve a timing problem. You need money against property now, and the conventional route either takes too long or will not lend at all.

It is not cheap, it is not a substitute for a mortgage, and it is not right for everyone. Used properly against a defined gap with a defined end, it does something no other form of lending does. Used as a way of putting off a decision, it is an expensive mistake. This page covers both.

We work across the whole short-term market and keep our own criteria database covering 67 active lenders (our wider panel runs to over 120 lenders across all product types), updated from primary sources rather than from rate tables. That database is why we can tell you quickly whether a deal is placeable and roughly where, instead of finding out three weeks in.

What bridging finance is used for

The obvious uses are a purchase and a chain break. The real list is a lot longer, and most of what we arrange sits outside the five examples that turn up on every broker's website.

Buying property

Auction purchases. The most common single use. An unconditional auction contract gives you 28 days, which a mainstream mortgage rarely meets. Forty-seven of the 67 lenders we track offer an auction product.

Chain breaks. Your buyer withdraws and the purchase above you will not wait. A bridge completes the purchase and the sale follows afterwards.

Buying before selling, and downsizing. Particularly where the income is modest against the equity, which is exactly what defeats mainstream affordability testing.

Property a mortgage lender will not touch. No kitchen, no bathroom, structural movement, fire damage, short lease, non-standard construction, Japanese knotweed. A bridge funds the purchase and the works, and the exit is a conventional mortgage once the property is lendable again.

Below market value and distressed purchases, including receivership and liquidation sales where the seller needs speed.

Repossession purchases, which carry deadlines of their own.

Buying at the end of a lease, or exercising an option before it expires.

Raising money against property you already own

Capital raising on an unencumbered property, which is often the fastest route to cash of any kind.

Second charge raising behind an existing mortgage, available from just over half the lenders we track.

Business cashflow and tax, including a VAT bill, a corporation tax bill or a self-assessment liability where the main asset is property.

Funding a deposit on another purchase, where the equity is sitting in a property that has not sold yet.

Paying inheritance tax, which falls due before an estate can be distributed and is a recurring reason probate stalls.

Buying out co-beneficiaries of an inherited property, or a former partner in a divorce or separation.

Settling a court-ordered financial settlement, to a timetable set by somebody other than you.

Refurbishment and development

Light refurbishment, meaning non-structural work, typically under 25% of the property value. Fifty-six of our 67 lenders offer it.

Heavy refurbishment, meaning structural work, work over 25% of value, or anything needing planning or building regulations consent. Forty-six lenders.

Conversions, including a single dwelling into flats, and commercial to residential under permitted development.

HMO conversion and licensing works. Forty-one lenders accept HMO security.

Ground-up development, offered by 39 lenders, and development exit finance by 25, which refinances a completed or nearly completed scheme onto cheaper money while the units sell.

Part-complete schemes, where the original lender has withdrawn or the facility has expired.

Land, with or without planning. Thirty-two lenders take land, but only eight will look at land with no planning permission at all.

Less common, and still placeable

Lease extensions, where a short lease has made a flat unmortgageable and the premium needs funding before the value comes back.

Title defects and missing documents, where a property cannot be sold or mortgaged until the title is put right.

Planning gain, funding the period between buying a site and getting consent.

Portfolio restructuring, moving properties between entities or releasing a property from an all-monies charge.

Breaking a cross-collateralised position, where a lender holds security over more properties than the debt actually requires.

Agricultural and equestrian property, mixed use, and property with an element of trade.

Foreign national and expatriate borrowers, accepted by 21 of the lenders we track as a documented position rather than a favour.

Revolving facilities, where a repeat buyer wants a standing line to draw on rather than a new application every deal. Only five lenders on our index offer a genuine one.

If what you need is not on that list, it is still worth asking. The list grows because clients ask.

How long a bridging loan actually takes

I recorded a whole episode on this, because it is the question I get asked more than any other and the published answers are not much use. The short version is below. The honest version is in the recording.

The lender is the fastest part of it

This surprises people. Everybody assumes the lender is the hold-up and it almost never is.

Indicative terms come back in an hour or two on most cases, sometimes four if the enquiry needs chasing. On a recent day I got four sets of indicative terms from four different lenders on four different scenarios, and a couple of them came back straight away because the client had given me enough detail to ask properly. Then, if we package the application exactly the way the lender has asked for it, the offer subject to valuation follows quickly behind.

So when you read that a lender completes 80% of its cases in 28 days, that is a good statistic. But ask what those cases are. If their maximum is 60% loan to value, they do desktop valuations, they do not do second charges and they do not do title splits, then of course most of their cases complete in 28 days. If they tell me they do all of that and still hit 28 days, fair enough, that is genuinely quick.

The valuation: one to three weeks

Where a desktop valuation or an automated model is acceptable, this can be done inside an hour. There is one lender I know of that runs the automated valuation at the indicative terms stage, so the terms come back saying you do not need a valuation at all.

But if you are stretching the loan to value, 75% gross, 80%, whatever it is, the chances are you will not get a desktop. And if the data behind a desktop is not strong enough to support the figure, they will send somebody out anyway.

So for a physical valuation, allow one to three weeks. That is instructing it, paying for it, the valuer fitting you into a diary that is probably already full for the week, the inspection, the report, and then the lender assessing it.

And on paying for it: I have lost count of the number of times a client has told me they need this done urgently, we have instructed the valuation, sent them the quote, and the payment comes 48 hours later. That is two whole days of nothing happening because we are waiting on a card payment.

The legals: two to six weeks, and the real bottleneck

From experience, the legal work is the biggest single slowdown in the process. Two to six weeks is the honest range, and which end you land on depends almost entirely on who you instruct.

Get a conveyancer who understands bridging. If you find a cheap one, probably because they do not do much bridging, you think you have saved some money. You have. It has cost you three weeks.

What slows the legals down:

• Title defects. Missing rights of way, unregistered land, a restriction nobody had noticed
• Leasehold enquiries. Service charge arrears, a short lease, an absent freeholder
• Title splitting and transfers of equity. We do a lot of these, a house with land that has planning on the garden, that sort of thing. Perfectly straightforward, but it is extra work and it adds time
• Consent on a second charge. You need the first charge lender's agreement, and they are in no hurry. I have had to fax a high street lender a consent letter and then wait. They could not care less whether you get your second charge or not. Start that one at the very beginning
• Independent legal advice, which is usually needed where you are buying through a limited company, because your own solicitor cannot advise you on it. Get it straight off the bat rather than when somebody mentions it in week three
• Searches, where the timescale will not allow full local authority searches and indemnity insurance has to be agreed instead

There is a fix for a lot of this, and it is dual representation, where one firm acts for both you and the lender. Given the choice between a lender offering dual representation at a slightly higher rate and a lender on separate representation at a lower one, I would take dual representation every single time. If you have ever worked with one solicitor you will know why two is not twice as good. Most lenders do want separate representation, so it is not always on the table, but ask.

The honest timescales

All of these assume a client who is actually engaged, pays the valuation fee the day it is requested and sends documents back the same day.

Those are subject to the case. Do not come at me if a straightforward one takes 11 working days.

On a regulated bridge there is one more step to build in: the offer has to stay binding on the lender for at least seven days. You can accept sooner, so it need not delay you, but it has to be in the plan.

What actually makes it fast

Fast finance is not about finding the fastest lender. It is about removing the reasons you would be slow.

Know your numbers, and be realistic with them. Not worst case, not best case. If the works are going to cost £80,000 then it is £80,000, not £70,000 and not £95,000. And get that figure from an actual builder, not from somebody you had a quick chat with down the road. If a lender ever had to repossess and finish the works, they would be employing a proper company to do it. They are pricing for that.

Stop trying to make your deal fit the lender's criteria. This is the one that costs people the most. There is a product with a lovely rate at 65% loan to value, so suddenly the property is worth a bit more than it was. Or the works get reclassified as light refurbishment to get the better rate, but the end value stays exactly where it was. The valuer does not care what the lender's criteria say. They will value what is actually in front of them, and the whole thing unravels in week three. Match the lender to your deal, not your deal to the lender.

Do not send information in drips and drabs. If the lender asks for assets and liabilities, the schedule of works, the proof of deposit, send all of it in one go. Half an assets and liabilities form comes back from the lender saying there are not enough assets, and then it turns out there was another property and a savings account that just did not get mentioned.

Tell me everything, warts and all. I will work out what the lender needs to know. What I cannot do is convince a lender you know what you are doing after something has surfaced on its own in week three. Do not tell me there is no knotweed. We will find out, and that is a week on your completion date.

Every question you dodge costs you. Not figuratively. Every unanswered question is roughly two days added to your completion date.

What we need from you on day one

Having these ready at the first conversation is worth more than anything else you can do.

• Photo ID and proof of address. Every lender, no exceptions. Increasingly done through an app rather than certified copies
• The property address, and an estimate of value. Without an address nothing can start. We cannot check whether a lender covers the postcode, whether the property type is acceptable, or whether it clears a minimum value threshold
• What the money is for. This decides whether the loan is regulated, which lenders can look at it, and sometimes whether it can be done at all. Debt consolidation in particular carries specific restrictions
• How much you need, and whether that is the net figure. Net is the money reaching your solicitor. Most quotes are gross, which includes the fee and the retained interest, and the difference is typically 10 to 15 percentage points of loan to value
• Your exit, with evidence. Covered in full below. This is the item that decides the case
• Proof of deposit, or source of funds. Where a property is owned outright, expect to be asked how the original purchase was funded. On something bought twenty years ago this can be the slowest item on the list, so start it early
• Details of any existing mortgage, including the lender, the balance and the monthly payment
• For a refurbishment, a schedule of works and costings. A written breakdown, not a figure on the back of a napkin. On heavier schemes, a build contract and the contractor's details
• For a company borrower, the company number, details of directors and shareholders, and usually a personal guarantee from the directors
• An honest account of any credit issues. Short-term lenders are far more tolerant than mainstream lenders and many apply no credit scoring at all. What causes a problem is a lender finding something in week three that it would have accepted in week one

The perfect client, for me, is the one who sends the schedule of works and then sends more than I asked for. The more you give me, the more I can work with, and the more of the lender's questions I can answer before they ask them.

The exit, and why it decides everything

Bridging lenders underwrite two things: the security and the exit. The exit is the one that gets deals declined.

On most structures a bridging loan has no monthly payments, so there is nothing to default on month by month. The whole risk sits at the end, on one date, when the balance falls due. The lender's only real question is whether you will be able to repay it.

Exits lenders are comfortable with

• Sale of the security property, where it is already on the market at a realistic price, and better still where there is an offer. The lender may instruct its own valuation of the property being sold, not just the one being bought
• Sale of another property, on the same conditions
• Refinance onto a buy to let mortgage, where the rent covers the stress test and the property will be lettable. Expect to be asked for an agreement in principle
• Refinance onto a residential mortgage, where income supports it and the property will be habitable
• Refinance onto a term commercial mortgage on an income-producing asset
• Sale of units on a development, where there is a realistic absorption rate and evidence of demand
• A known, dated receipt, such as a pension lump sum, the completion of a sale that has already exchanged, or a settlement that has been ordered

Exits lenders are not comfortable with

• "I'll refinance when my credit improves." On a regulated loan a lender is specifically prohibited from accepting this unless it holds evidence of a guaranteed offer. On an unregulated loan it will usually be declined anyway
• A refinance that does not stack today. If the rent will not cover a buy to let stress test now, and nothing in the plan changes that, the exit does not exist
• A sale at a price the market does not support. A property that has been on at £400,000 for eight months with no offers does not have a £400,000 exit
• Planning that has not been granted. Some lenders will take planning risk. Most will not, and the ones that do price it
• "I'll find another bridge." Re-bridging is possible and we arrange it, but no lender will accept it as the stated exit at the outset
• Nothing in particular. A fair number of enquiries arrive with equity, a clear need and no exit. Those are the ones where the honest answer is that bridging is the wrong product

What makes an exit credible

Evidence, a date, and a margin. An exit that only works if everything goes perfectly is not an exit. If the plan is to sell at £400,000 within nine months, the question is what happens at £370,000 in month eleven. A good answer to that question is what makes a lender comfortable.

Regulated and unregulated, briefly

A bridging loan is regulated by the FCA where it is secured against a property occupied, or intended to be occupied, by you or a close family member, and at least 40% of the property is residential. It is unregulated where the security is an investment or commercial property, or where the borrower is a limited company.

The practical consequence is the size of the market. Only 12 of the 67 lenders we track offer regulated bridging. The rest lend solely against investment and commercial property. Regulated lending also brings extra protections and extra steps, including a proper assessment of your exit, the seven day reflection period on the offer, and a regulated advice process. It takes longer and the panel is much smaller, which is why buying your own home at auction is harder to fund than buying an investment, not easier.

Our regulated bridging page covers the legal test, the protections and the criteria in full.

What goes wrong, and what we do about it

Four things account for most of the deals that get into difficulty.

The valuation comes in below expectation. The most common single problem, and the bane of everyone's life. The advance is worked out on the lower of purchase price and valuation, so a down valuation immediately increases the cash you need, and on an auction purchase you are already contractually committed.

What we do: set expectations against comparables before you commit, not after. Where one does come in low, the options are more cash, additional security, a different lender with a different valuer, or a renegotiation. Having a contingency identified before the report lands is what turns this from a crisis into an inconvenience.

The exit slips. The sale falls through, the refinance is declined, the works overrun.

What we do: build the term with headroom instead of cutting it fine. Where the rebate basis is good, a twelve month facility redeemed in month six costs roughly six months of interest, so the longer term costs very little and removes the risk of an extension at 1% of the balance. We also start the exit early, because a buy to let refinance takes time and some lenders apply a six month ownership rule before they will lend against the improved value.

The legal work stalls. A title defect, a missing consent, an absent freeholder, a first charge lender sitting on a deed of priority.

What we do: get the title and the legal pack in front of a solicitor who does bridging work before the application goes in, so problems surface in week one rather than week three. On an auction purchase that means reading the legal pack before you bid.

The cash requirement was underestimated. Almost always because the quote was gross and the budget was built on it, or because stamp duty, the buyer's premium and transferred seller's costs were never counted.

What we do: quote in net terms from the outset and give you the full cost picture, including the bits that are not lendable. The number that matters is what reaches your solicitor. Our rates page breaks down every single charge.

There is a fifth that is specific to refurbishment. Works money is released in arrears. You pay for a stage, the surveyor inspects it, the lender reimburses you. That creates a working capital requirement entirely separate from your deposit, and running out of cash halfway through a project is both common and completely predictable.

Our track record

We have arranged comfortably over £250 million of bridging and short-term property finance. On its own that is not a reason to use anybody, but it is the reason the criteria database exists, and it is why we can usually tell you inside a phone call whether a deal is placeable and roughly where it goes.

Who should not take a bridging loan

This is the part most brokers leave out, and it matters more than anything else on this page.

If you have no exit, do not take a bridge. Equity is not an exit. Intending to sell is not an exit. A bridge converts a problem you have today into a larger, dated problem twelve months from now, and the interest comes out of your equity in the meantime.

If you are using it to service other debt, stop. Borrowing against your home to meet payments on other borrowing is a pattern that ends badly, and the cost of bridging makes it end faster. Debt advice is the right call here, and it is free.

If a mainstream mortgage would do the job and you have the time, take the mortgage. Bridging costs several times more. The only things it buys are speed and access to property a mortgage will not touch. If you need neither, you are paying for nothing.

If the project only works at the best possible outcome, it does not work. If the numbers need the top of the valuation range, no overrun and a fast sale, your margin for error is zero, and bridging is unforgiving of error.

If you cannot afford to lose the deposit or the fees, be careful. Valuation fees, commitment fees and legal costs are payable whether the loan completes or not, and on an auction purchase the deposit is at risk from the fall of the hammer.

If somebody who benefits from the transaction is rushing you, slow down. Pressure to commit quickly is a reason for caution, not a reason for speed.

We decline enquiries on these grounds regularly. It costs us a fee and it is the right call every time.

What a broker does, and what a broker cannot do

What we do that going direct does not

We know who will actually look at it. Published criteria and real criteria differ, and the difference is usually in the basis rather than the percentage. A headline 75% that is gross is not the same as a 75% that is net, and the gap is worth tens of thousands on a mid-sized loan. We keep a criteria database of 67 lenders built from primary sources and conversations with their business development managers, precisely because the published material is not reliable enough to place a case on.

We compare on total cost, not rate. Two lenders quoting the same monthly rate routinely produce costs thousands apart once the exit fee, the admin fee, the minimum interest period and the rebate basis are counted. On short loans the fees matter more than the rate does.

We reach lenders you cannot. A number are intermediary-only and will not deal with the public at all. Some are available only through specific packagers.

We present the case properly. A case that arrives with the exit evidenced, the works costed and the credit issues disclosed gets a different answer from the same lender than one that arrives as three lines in an email.

We can run more than one lender in parallel on a tight deadline, so a declined valuation does not end the transaction.

What we cannot do, honestly

We cannot make a lender lend. If the exit does not stand up, no amount of presentation fixes it.

We cannot change a valuation. We can challenge one with comparables, and sometimes that works. Usually it does not.

We cannot make a deal cheaper than the market. Where a lender publishes a rate card we work within it, and while there is more movement than published material suggests, a broker who promises to beat the market on price is selling you something else.

We cannot speed up a solicitor who is not responding, a freeholder who will not engage, or a first charge lender sitting on a consent. We chase. We cannot compel.

We charge a fee, disclosed in writing before you commit, and lenders pay us a procuration fee which is also disclosed. Both appear on your illustration.

How bridging compares to the alternatives

Bridging is frequently not the answer, and a good adviser should say so.

Worth doing the arithmetic on that fourth one. A 10% to 25% discount on a £300,000 property is £30,000 to £75,000. Against a bridge costing perhaps £25,000 over six months, selling at a discount is frequently the more expensive route even though you pay no interest at all.

Bridging beats all of them when the timescale is weeks or days rather than months, the property is not currently mortgageable, your income will not support a conventional assessment, or the opportunity disappears if you wait. Outside those four, look at the alternatives first.

Understanding Bridging Loan Rates with Bridging Finance Broker

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