Find out what bridging loan rates are available to you

A bridging loan is a type of short-term loan (typically 1 to 18 months) that allows you to purchase or develop a property quickly. You’ll need to have a longer-term financial solution to pay off the loan, such as a property sale or a traditional mortgage down the line (this is known as an ‘exit strategy’). They are called bridging loans because they ‘bridge the gap’ between a current financial need and an expected future source of funds.  

Bridging loans are secured, usually against the property or land you are purchasing (but there are other options). They are much quicker than traditional mortgages and can be taken out on un-mortgageable properties, such as ‘fixer-uppers’. You can typically expect to receive the funds within 7 to 14 days, making them a great option for buying property at auctions.

A bridging loan is typically used to purchase or develop a property when a regular mortgage isn’t an option. Here are some examples of when you might want to use a bridging loan:

• Buying at Auction – You may need to raise funds quickly, often in just 28 days. This is too fast for a standard mortgage. With a bridging loan you can receive the funds within 7 to 14 days, allowing you to secure your auction purchase.
  
  
• Renovation or Refurbishment – ‘Fixer-upper’ properties are not typically eligible for a traditional mortgage due to the state of disrepair they are in. Bridging loans are designed for this kind of purchase, and they will usually cover both the purchase and renovation costs.
  
  
• Breaking a Property Chain – If you’ve fallen in love with a new home but are still waiting for your current one to sell, a bridging loan can provide the funds needed to complete the purchase. This allows you to effectively become a ‘cash buyer’ from the seller’s point of view.
  
  
• Business Purposes – Bridging loans can be used by businesses for short-term financing needs, such as buying new premises, paying tax bills, or managing cash flow.

Unlike traditional mortgages, bridging loan rates are calculated and charged on a monthly basis. Typically, they tend to sit between 0.5% and 2% per month, depending on the lender and borrower’s circumstances. A rate of 1% per month is equivalent to a 12% annual rate, which seems high, but bridging loans are meant to be repaid in a short timeframe to minimise the amount of interest you pay overall.

There are two options for repaying the interest on a bridging loan:

• Serviced Bridging Loan – With a serviced bridging loan you pay the interest off each month and then the full loan amount at the end of the term.
  
  

• Rolled Up Bridging Loan – With a rolled up bridging loan the interest is added to the loan amount and you pay both off together at the end of the term.

You’ll typically need at least a 25% to 40% deposit to be eligible for a bridging loan. In other words, bridging loans are usually offered at a maximum of 60% to 75% loan-to-value (LTV).

However, if you have less than a 25% deposit, we may still be able to help you get a bridging loan using a specialist lender. Having additional security (such as another property with sufficient equity) can also help you borrow more with a smaller deposit.