Bridging Loans Explained: How They Work, What They Cost, and When to Use One

Bridging loans are one of the most misunderstood products in commercial finance - fast and flexible when used well, expensive if used wrongly. This guide explains what a bridging loan actually is, what it costs, and when it's the right tool for the job.

What is a bridging loan?

A bridging loan is a short-term, property-secured loan designed to 'bridge' a gap in funding - usually for a few weeks up to 12-24 months. It's used when speed matters or when a property or borrower doesn't fit a mainstream lender's criteria. The loan is repaid in full at the end of the term from a defined 'exit', such as a sale or a refinance onto a longer-term mortgage.

When does bridging finance make sense?

• Auction purchases where completion is required within 28 days.
• Chain breaks - buying a new property before your existing one sells.
• Refurbishment of a property that isn't currently mortgageable.
• Time-sensitive opportunities where a mainstream mortgage would be too slow.
• Releasing capital quickly against an existing asset.

What does a bridging loan cost?

Bridging is priced per month rather than per year, reflecting its short-term nature. Costs typically include:

• Monthly interest - often charged as a monthly rate; interest can be serviced, retained (deducted up front), or rolled up and paid at the end.
• Arrangement fee - commonly around 1-2% of the loan.
• Valuation and legal fees - paid to third parties.
• Exit fee - charged by some lenders on repayment.

Because the headline rate is monthly, always compare the total cost over your expected term, not just the rate.

Loan-to-value and exit

Most bridging lenders advance up to around 70-75% of the property value, sometimes higher with additional security. The single most important part of any bridging application is a credible, evidenced exit - lenders want to see exactly how and when they'll be repaid. A weak exit is the most common reason bridging deals fall down.

How fast can it complete?

Well-prepared bridging cases can complete in a matter of days to a few weeks - far quicker than a standard mortgage. Having a valuation, solicitor and clear exit ready in advance makes all the difference.

How we help

Bridging is a specialist market with wide variation in rates, fees and appetite between lenders. We match your case to a lender comfortable with your property, timeline and exit, and negotiate terms that reflect the real risk. At Sadi's Commercial Finance we arrange bridging finance with trusted lenders and structure it around a clear repayment plan.

Need funding at pace? Explore our bridging loans service or speak to a specialist about your project.