Many property investors and landlords find themselves spotting perfect opportunities but lacking immediate funds to act.
Cash flow issues create real headaches for property investors.
Waiting for a mortgage can take months, while property sales drag on – all while that perfect investment opportunity gets snapped up by someone who can move faster.
With bridging finance, you can secure properties fast, complete refurbishments, or expand your portfolio while waiting for longer-term funding to fall into place.
Understanding Bridging Loans
Property investors use bridging loans differently than homeowners. While homeowners might use them to break a property chain when moving house, investors leverage them strategically to seize opportunities and maximise returns.
Bridging finance can only be set up for a short duration. Terms of up to 24 months are available but most last 6-12 months.
You borrow the money, you do the deal, you repay the money (plus the interest).
Simple.
Bridging can be arranged using first, second and even third charges.
First charge loans are the primary loan secured against a property, while second charge loans sit behind an existing mortgage. Most property investors use first charge bridging when buying new assets, while portfolio landlords might use second charge loans against existing properties to release equity for new purchases.
Our minimum loan amounts start at £150,000, making them suitable for serious property investors rather than small projects. Loans are secured against the property being purchased or against other portfolio properties.
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Fees and Charges
Bridging loans include several cost elements beyond the interest rate.
The interest on bridging loans is calculated monthly rather than annually. This makes sense given their short-term nature.
The interest can be structured in three main ways. What you get offered will depend on the lender:
Monthly payments allow you to service the interest as you go, reducing the overall cost. This works well for properties already generating income. For example, if you’re using a bridge to add more units to an existing rental property, the income from current tenants can help service the interest.
Rolled-up interest means adding the interest to the loan balance to be paid at the end. This helps with cash flow during projects like refurbishments where no income is being generated.
Retained interest involves calculating the total interest up front and including it in the loan amount. This gives you certainty about costs but means you’re borrowing more initially.
Beyond interest, you’ll pay an arrangement fee (2% of the loan amount), legal fees (both yours and the lender’s), valuation fees, and sometimes exit fees. These add significantly to the overall cost, so factor them into your investment calculations.
Several elements affect your overall costs.
Loan-to-value ratio (LTV) is key – lower LTVs generally mean better rates. The property type matters as well, with standard residential properties usually securing better terms than complex commercial sites. Your track record as an investor and the strength of your exit strategy can also influence the deal you’ll be offered.
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Let’s talk bridging loans!
Six Smart Ways Property Investors Are Using Bridging Loans
Let’s look at the practical applications that make bridging finance valuable for property investors and landlords.
Snapping Up Auction Bargains
Property auctions offer some of the best deals, but they come with tight timeframes.
When you win a bid, you’ll need to pay a 10% cash deposit immediately and then complete within 28 days.
Bridging loans solve this timing problem.
The auction market moves quickly, with properties often selling 15-20% below market value.
Having auction bridging finance pre-arranged gives you the confidence to bid effectively and complete purchases within the required time. Many experienced investors establish relationships with bridging brokers before attending auctions to ensure they can act quickly when opportunities arise.
Read more: Using a Bridging Loan to Buy at Property Auctions
Eliminating Property Chain Delays
Property chains frequently cause delays and frustrations.
As an investor, you might find the perfect addition to your portfolio but be stuck waiting for funds from another property sale to come through.
Bridging loans break this dependency.
Unfortunately, in our competitive property market, chain breaks are common. Having the flexibility to proceed with purchases independently of sales gives you a significant advantage over investors reliant on property chains.
This independence also strengthens your negotiating position, as sellers often prefer buyers who can move quickly without chain complications.
Read more: How to Use Bridging Finance to Break a Property Chain
Funding Profitable Refurbishment Projects
Properties needing work often offer the best returns but present funding challenges.
Regular mortgages don’t cover the renovation costs, and properties in poor condition might not meet lender requirements anyway.
Refurbishment bridging loans fill this gap neatly. They fund both the purchase and refurbishment costs, with some lenders offering staged drawdowns as work progresses.
Light refurbishment might involve cosmetic improvements like new kitchens, bathrooms, or decorating. Heavy refurbishment includes structural changes, extensions, or complete property overhauls.
Loans can be used for property flipping, or for assets you want to keep.
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Accelerating Portfolio Growth
Experienced landlords can use bridging loans to expand their portfolios efficiently.
By releasing equity from existing properties, you can fund deposits on new acquisitions without waiting to sell.
This approach allows for faster portfolio growth than accruing each deposit individually.
It works particularly well in rising markets where property values increase during the bridging period. The strategy requires careful cash flow planning to manage the bridging costs until refinancing completes.
Read more: Understanding Bridging Finance for Buy-to-Let Properties
Securing Below Market Value Deals
Some of the best property deals require quick decisions and fast access to funds.
Motivated sellers, probate sales, or financial distress situations can create below market value opportunities that won’t wait for standard mortgage processes.
Bridging loans provide the speed needed to secure these deals.
The property market creates regular BMV opportunities, but they require both quick identification and fast access to finance. Having bridging finance available allows you to pounce when these opportunities arise.
Successful investors build networks with estate agents, solicitors, and other professionals who might refer distressed sales before they reach the open market.
Property Conversions
Changing a property’s use can create substantial value but requires specialist funding.
Converting commercial buildings to residential use, or standard homes to Houses in Multiple Occupation (HMOs), falls outside standard mortgage criteria.
Bridging loans support these projects throughout the conversion process.
Our planning regulations and building requirements add complexity to conversion projects. Bridging lenders understand these challenges and will consider the projected end value (GDV – Gross Development Value) when structuring loans for conversions.
So you can borrow against the end value.
The most profitable conversions often involve changing use class – from commercial to residential, or from single dwelling to multiple units. These changes require planning permission, and some bridging lenders will even fund the planning application process as part of a two-stage loan.
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Who’s Making the Most of Property Bridging Finance?
Bridging finance suits various property investors, not just large-scale developers. First-time investors with strong plans can access bridging loans, though experience certainly helps secure better terms.
The most common users include:
Flippers
Property flippers who buy, refurbish and sell homes for profit rely on bridging loans to fund quick purchases and renovations.
Since their business model involves selling rather than refinancing, the short-term nature of bridging finance aligns perfectly with their strategy.
Landlords
Buy to let landlords use bridging loans to efficiently acquire properties needing work before they can be mortgaged or let.
Once refurbished and tenanted, these can be refinanced onto standard buy-to-let mortgages, repaying the bridging loan in the process.
This approach works particularly well for properties that don’t meet minimum EPC requirements for buy-to-let mortgages until improvements are made.
Developers
Property developers working on larger projects use bridging finance for smaller developments or as initial funding before moving to development finance.
The speed of arrangement makes bridging ideal for securing sites quickly while arranging longer-term development funding. Some developers use bridging loans to purchase land while finalising planning permissions, then refinance onto development loans once plans are approved, just to keep the project moving.
Who can Borrow?
Individual investors, partnerships, limited companies, and SPVs (Special Purpose Vehicles) can all access bridging finance.
Many professional landlords operate through SPV limited companies for tax efficiency, and bridging lenders are comfortable with this approach. The structure you choose affects both your tax position and sometimes the loan terms available.
International investors buying UK property also use bridging loans. Foreign nationals might face restrictions with mortgage lenders but can often secure bridging finance if they have a clear exit strategy and the property is in the UK. These investors frequently use UK-based SPVs to hold properties, simplifying the lending process.
Exploring Alternatives
While bridging finance works brilliantly for many property investment scenarios, it’s worth considering alternatives to ensure you’re using the most appropriate funding method.
Development Finance
Development finance provides a longer-term solution for major construction or conversion projects. Unlike bridging loans, development finance offers staged drawdowns aligned with building phases and usually runs for 12-24 months.
If your project involves significant structural work or new builds, development finance might offer better rates for the extended timeframe needed.
Buy To Let Mortgage
A straight buy-to-let mortgage works well if your property is already habitable, mortgageable and you don’t need to complete super quickly.
These mortgages offer lower interest costs for long-term holds but take longer to arrange and have stricter property and income requirements. For ready-to-let properties in good condition, this remains the most cost-effective long-term solution.
Commercial Mortgages
Commercial mortgages suit investors purchasing functional business premises or larger residential blocks.
With terms up to 25 years, they offer low monthly payments but require properties to be in good condition and already generating income.
JV and Private Investor Finance
Private investor finance sometimes offers more flexible terms than institutional lenders. Some experienced property investors fund other people’s projects, potentially creating win-win scenarios.
These arrangements vary widely in structure and cost, often depending on personal relationships and the specific project details. Joint venture partnerships might involve one party providing funding while another contributes expertise or labour.
How Specialists Can Help
Working with experienced brokers offers property investors significant advantages when arranging bridging finance.
Brokers have relationships with numerous lenders, including specialist property investment lenders who don’t deal directly with the public.
This wider market access helps find the most appropriate lender for your specific project type, whether it’s an auction purchase, HMO conversion, or portfolio expansion.
Property investment often involves complex scenarios that mainstream lenders struggle with. Brokers who understand property development can present your case effectively, highlighting the strengths of your project and explaining elements that might initially concern lenders.
Expert Exit Planning
Exit strategy development is where brokers can add a lot of value.
They help create robust, realistic plans for loan repayment, whether through sale or refinancing. And their market knowledge ensures these plans satisfy lender requirements.
Property lending comes with regulatory and practical complexities. Specialist brokers stay updated on changing lending criteria and market conditions, helping you adapt your finance strategy accordingly.
For property investors managing multiple projects, brokers also provide valuable continuity. They understand your business model and investment strategy, making each subsequent finance arrangement more efficient.
Read more: Creating Winning Exit Strategies for Bridging Loans
Taking Action
If you’re considering using bridging finance for your next property project, start by clearly defining your investment strategy. Know exactly what type of property you’re targeting, what work it needs, and how you’ll exit the bridging loan.
Remember that bridging finance works best as part of a planned investment strategy rather than a last-minute rescue option.
The most successful property investors integrate short-term funding into their overall approach, using it as a strategic tool to accelerate growth and seize opportunities others miss.
To speak with a specialist broker, please call us on 020 3951 2828.
FAQ
For experienced investors with straightforward cases, bridging loans can be approved in as little as 48-72 hours, with funds released within 7-10 days. Auction purchases can be expedited to meet 28-day completion deadlines. Having documentation ready in advance always helps to speed up the process.
Our minimum loan amount is £150,000.
Bridging loans are short-term (typically 3-24 months), arranged quickly, and focus on the property value and exit strategy rather than rental income. Buy-to-let mortgages are long-term (5-25 years), take longer to arrange, and require the property to be in mortgageable condition with proven rental potential.
Yes, bridging loans are ideal for properties needing significant renovation. Many lenders offer specific products for light and heavy refurbishments, with some providing staged drawdowns as work progresses. Lenders will assess both the current value and the projected value after works (ARV) when determining loan amounts.
The most common exit strategies are refinancing onto a long-term mortgage (buy-to-let or commercial) or selling the property. Lenders want to see clear evidence that your strategy is realistic, such as a mortgage broker’s letter confirming refinance options or comparable sales supporting your projected sale price.
Yes, bridging loans are ideal for HMO conversions. Lenders understand the value these conversions create and will consider both the purchase and conversion costs. You’ll need to demonstrate knowledge of HMO licensing requirements in your area and show that the finished property will either sell or qualify for HMO mortgage refinancing.
Light refurbishment typically involves cosmetic improvements (decoration, new kitchens/bathrooms) without structural changes or planning permission. Heavy refurbishment includes structural alterations, extensions, or conversions requiring planning permission. Heavy refurbishment loans usually involve more detailed monitoring and staged drawdowns.
Lenders typically offer up to 65-75% of the property’s value (LTV), though some go to 80% for strong cases. For refurbishment projects, they may lend up to 70% of the current value plus a percentage of the refurbishment costs, or up to 65% of the gross development value (GDV) – the projected value after works.
Read more: How Much Can I Borrow on a Bridging Loan?
