New Bridging Finance Guide: UK 2025

In this Guide, we help you to navigate the bridging finance market to find the bridging loan which best suits your specific situation and circumstances. We have picked the brains of our Managing Director, Max Mace, who not only has 20 years’ experience in bridging, development and commercial finance but also has a wealth of personal, first-hand experience using many different types of bridging finance.

What is Bridging Finance?

Bridging Finance is a short term loan that is used to bridge a financial gap between the sale of an existing property and the purchase of a new property, which can be secured against any property type. There is regulated and unregulated bridging finance. Regulated is only used on a property that someone is going to reside in, themselves. All other types of bridging finance fall into the unregulated category. Regulated cases are residential properties that the owner is going to live in, they may wish to renovate or purchase a property at auction. Unregulated finance might be a doer-upper, commercial property, or a scenario where the finance is spread across several properties or even a client’s whole portfolio. Developer Exit finance would also fall into that last category. This finance may be used by a developer to finish a site, looking to release capital and reducing costs at the same time.

What is Bridging finance typically used for? What’s the latest deal that you’ve done for one of our clients? 

It is a very versatile financial product, as I mentioned earlier and can be used for a number of reasons.

To provide a real life example; I spoke to a client this morning who’s looking to buy a property. They believe that they are likely to get development planning for further housing on the site. They are buying the site for £510,000. We’re raising a 75% bridging loan and they’ll fund the deposit themselves, and then that will provide them with a period of time to secure planning. At this point the client will decide what they’re going to do with the site. They may carve it up into plots, sell it on, or ‘exit’ onto development finance and build-out the aforementioned units, assuming planning is granted.

How is bridging finance reviewed in terms of eligibility for clients? Is it like a normal mortgage where it’s based on income and affordability? Who’s eligible for it, who can get it?

Regulated bridging is by the very nature more stringent because it is an FCA regulated product and therefore it’s all about affordability and ‘the exit’, that is, how you’re going to get out of it.

Regulated bridging is also only available over a maximum of a twelve month term. Therefore, there is much sharper criteria based on how you will pay the debt off, is it affordable? Can you afford all of the monthly costs? It’s a loan which is less frequently used by our clients simply because it exists for people who are perhaps in a chain, their buyer falls through and they need to complete on the purchase and then allow for time to sell their property. 

Unregulated bridging is a different type of product. Everything which is not a primary residence falls into this category. The most common use is a client buying a property that’s not habitable, requires upgrading, and they’re either going to sell it or then exit onto some form of buy to let or HMO product.

How much could I look to borrow if I was proceeding with a Bridging loan?

All bridging finance or the majority of bridging products are available up to 75% loan to value. The only thing to bear in mind is that you have three payment options with bridging. You can either pay like a mortgage, with a monthly direct debit. You have a retained interest option. What that means is that the lender deducts the interest on the day of completion. So although you might be borrowing 75% loan to value, by the time the lender deducts the funds, for example, twelve months interest, your actual net loan might be 60%, 68%, depending on loan size. The third option is a roll-up of interest. It’s generally used more with development finance than bridging, but it can just simply roll up the interest and therefore your debt gets larger month, by month.

How long can I borrow the money for? My mortgage is over 25 years. Is a bridge similar to that?

A regulated bridge, as I touched on earlier, is a maximum of twelve months. And it’s very hard and fast on that. It is set in stone. A non regulated bridge can be as long as three years, I would say typically at their twelve to 18 months. The thing that every client needs to remember with Bridging finances, it’s there to fund a gap or to maximise a return on an investment. And therefore the shorter amount of time that you have that product, the more profitable you will be. So we might enter someone in a twelve or 18 month bridge just to give us enough time, but the anticipation would hopefully be to be out of it in six to twelve months.

What would happen to a client if they reached the end of their twelve month bridge period and they didn’t have the funds in order to exit the financial product?

This is something that can happen quite regularly. We have very strong relationships with all of the lenders we work with and if that does happen, some will charge a nominal fee. It varies greatly between lenders but some will give you an extension on the borrowing facility. It could be anything from a three to six month extension.

All bridging finance has a default rate and the default rate tends to be twice the original lending rate. So if you were paying 1% per month, it would default to 2% per month. However, most lenders will try to allow clients to extend the period in one way or another. There’s other lenders in the market that we work with, where we’re strategic partner, where actually they will honour the exact same rate and won’t levy any cost, and they’ll grant a three month extension as long as it’s plausible. Perhaps the property is now under offer or they can see a refinance application is in with them or another lender.

How much does bridging finance cost?

Bridging finance has actually become cheaper. Right now, bridging rates start from around 0.65% to 0.75% per calendar month. Bridging rates are always quoted monthly, but obviously all you need to do is to multiply that by twelve to give you an annual rate. So if you’re at 0.5%, to keep the maths simple, it would be 6% per annum. When you actually look where mortgage rates are at the moment, bridging rates haven’t increased in the same line, so it can be quite competitive. Those rates tend to be at low loan to values around 50%, loan to value. Once you get up to 75% loan to value, I’d say your average rate is somewhere between 0.75 and 0.95%, depending on client, asset and exit. And then almost all Bridging will come with a 2% arrangement fee. Quite often that can be added above the loan to value. And I think the key thing is to make sure there are no exit fees. The majority of people shouldn’t be paying an exit fee on Bridging.

If I decided to proceed with a Bridging Finance loan, how quickly might I receive funds?

The fastest deal I’ve ever completed is three days. And that was without a valuation because we had a valuation from a preceding deal. I would say, typically you should allow three to four weeks in most part due to the valuation process. Certainly, we use it for auction purchases all the time and  with these types of deals, you only have 28 days to complete, so we feel very comfortable that we would get  through to competition within that timescale.

Can you explain what the term ‘exit strategy’ means and why it’s so important?

When it comes to bridging finance, lenders are really keen on three things; who are they lending to? What is the asset and is it strong? And, how are we going to get our money back? If you can answer those questions for the lender, generally speaking, we will be able to secure a deal. 

The  exit is simply how are you going to repay it. Bridging is by its very nature, a short term product and therefore we’ve got to determine how you’re going to exit the deal and move onto another mortgage, loan or financial product. Generally, the ‘exit’ is through a sale. Normally our clients use bridging to prove the asset/property and will then either look to offload it or they will retain it. If we use my earlier case study as an example, I set up a deal yesterday for a client who’s developing a commercial unit into nine flats. Once that’s complete, they are going to retain all of the units. In this scenario, we would build enough time into the bridging loan term, not only to complete the works, but also to carry out the refinancing work. 

What, in your view, are the downsides or risks that someone should keep in mind when approaching Bridging finance?

It’s obviously more expensive than a standard mortgage. However, what I say to clients,  is factor that in. People have to understand, if you’re going to make £100,000 profit, the lender is going to take a piece of that for supporting it and giving you the majority of the funds. So, the  cost is obviously something to bear in mind. 

It’s also a very competitive market. There are over 300 lenders in this space. Ensure you’re using a broker who’s got access to those providers,as we have. As mentioned earlier, be mindful of ‘the exit’. The longer you have a bridging loan, the more the cost increases.  Every month you retain the bridging finance, you’re eating away at your profit. So really, it just comes back to ‘the exit’ and initial setup cost. The final point is to make sure you only complete on the bridging deal when you need the money. Don’t complete on the finance, have the money and then not utilise it for a month or two, because every day you’ve got the loan, you’re paying for it.

What are your top tips for any clients that are approaching an application for bridging finance?

1. Ask your broker to look at the whole market and ensure you’ve received a competitive quote. 

2. Make sure that you’ve covered off the three key things mentioned above. Are you credit worthy? Obviously, if people do have some blips on their credit history, it’s not a problem. We can still arrange bridging finance, but like with any financial product, the cleaner the credit profile, the better. 

3. Make sure you really understand your asset and what you want to do with it. 

4. Have you got everything lined up? If you require planning, where are you with that process? Have you got the right team in place making sure that you can deliver on what you say you’re going to do within the specified time and with the knowledge that your exit is as rock-solid as possible? 

5. If your chosen exit is a sale, does it also stack up on a refinance? If you can exit onto a cheaper product, sometimes we’ll do that even though the client is going to sell something. For instance, I’ve had clients who have renovated a house and we’ve chosen a buy to let mortgage with no early repayment charge. They remain on that mortgage at a much lower cost and when the property sells, they are able to clear the finance.