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Bridging Loans

What is a bridging loan?

What is a bridging loan? A bridging loan (or 'bridge loan') can be useful if you need to borrow money for a short period. It can help to ‘bridge the gap’ if you want to buy a new home before selling your old one.

​Bridging loans can also be used if you buy a property at auction, where you’ll need the money immediately but may not have sold your current property yet.
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How does a Bridging Loan work?

There are two types of bridging loan: ‘closed’ and ‘open’.

Closed Bridging Loans


With a closed loan, there is a fixed repayment date – you will normally be given this kind of loan if you have exchanged contracts but are waiting for your property sale to complete. 

Open Bridging Loans

With an open loan, there is no fixed repayment date, but you will normally be expected to pay it off within one year. 

Whichever kind of loan you take out, the lender will want to see evidence of a clear repayment strategy, such as using equity from a property sale or taking out a mortgage. 

They will also want to see evidence of the new property you are purchasing and the price you plan to pay for it, as well as proof of what you are doing to sell your current property if relevant.  You should also have a back-up plan in place in case your repayment strategy fails.
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How does a bridging loan work?
First & Second Charge Bridging Loans
What are First & Second Charge Bridging Loan?

When you take out a bridging loan, a ‘charge’ will be placed on your property. This is a legal agreement that prioritises which lenders will be repaid first should you fail to repay your loans. 

Both a first and second charge bridging loan take your property as security in case you default on repayments. 

Typically, if you still have a mortgage on your property, the bridging loan will be a second charge loan, meaning that if you failed to meet repayments and your home was sold to pay off your debts, your mortgage would be paid off first. 
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But if you owned your property outright, or you were taking out a bridging loan to repay your mortgage in full, you would take out a first charge bridging loan. This means that the bridging loan would be repaid first if you fell behind with repayments. 

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How much does a Bridging Loan cost?
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Bridging loans are priced monthly, rather than annually, because people tend to take them out for a short period. One of the major downsides of a bridging loan is that they are quite expensive: you could face fees of between 0.5% and 1.5% per month. 

That makes them much pricier than a normal residential mortgage. There are also set-up fees to consider, usually around 2% of the loan you want to take out, so it is advisable to only take a bridging loan out if you are confident that you will not need it for a long period of time. 

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How much can you borrow with a Bridging Loan?

In cash terms, bridging loan providers might lend anything between £25,000 and over £25m. But you will usually only be able to borrow a maximum loan-to-value ratio (LTV) of 75% of the value of your property. 

If you are taking out a first charge loan, you will typically be able to borrow more than if you were taking out a second charge loan. 
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A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.  CLICK HERE TO SEE OUR FEE INFO 

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME OR PROPERTY. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST FORMS OF BUY TO LET MORTGAGE.
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Prospect Tree Mortgages Ltd is an appointed representative of TenetConnect Services Ltd, which is authorised and regulated by the Financial Conduct Authority. TenetConnect Services Ltd is entered on the Financial Services Register (www.fca.org.uk/register) under reference 150643.
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Prospect Tree Mortgages Ltd is Registered in England and Wales under reference 10112043. Registered Office Address: Acorn Barn, Wembdon Business Park, Smeeth, Ashford, Kent, TN25 6SZ. 

​The information contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
© COPYRIGHT 2018. PROSPECT TREE MORTGAGES LTD. ALL RIGHTS RESERVED.
  • Mortgages
    • First Time Buyer
    • Remortgage
    • Buy to let
    • Equity Release
    • Bridging Loans
    • Sports Professionals
    • Second charge mortgages
  • Services
    • Workplace Mortgage Clinics
    • Partners & Introducers
    • Recommended Companies
    • Refer a friend
  • About
    • Meet The Team >
      • Nick Daynes
      • Ian Butt
      • Robin Newall
      • Matthew Lee
      • Graeme Childs
      • Fred Barham
      • Philippa Read
      • Philip King
      • Milo the dog
    • Reviews
    • Partnerships
    • Supported Charities
  • News
  • Contact
  • 0800 8620 840