This article is for general information only and does not constitute financial advice. Seek advice from a qualified broker.
A bridging loan fills the gap between buying a property and arranging long-term finance. The loan term is short (one to eighteen months), the interest rate is higher than a mortgage, and the lender's primary concern is your exit strategy, which is how you plan to repay.
Bridging is the standard finance tool for auction purchases (28-day completion), property refurbishments (buy, renovate, refinance), and chain-break situations. It is not cheap, and it should not be used as a substitute for proper financial planning.
Current rates
Monthly interest rates for unregulated bridging loans (investment property) run from 0.55% to 1.2% per month in 2026. That translates to 6.6% to 14.4% per annum. Rates depend on LTV, property type, borrower experience, and exit strategy clarity.
Regulated bridging loans (for properties you intend to occupy) are subject to FCA rules and typically carry slightly lower rates.
How the costs add up
On a £200,000 bridging loan at 0.8% per month, held for six months:
| Cost | Amount |
|---|---|
| Monthly interest (0.8% x £200,000 x 6) | £9,600 |
| Arrangement fee (1.5%) | £3,000 |
| Valuation | £500 to £1,000 |
| Legal fees (lender's solicitor) | £1,500 to £2,500 |
| Exit fee (if applicable, 0.5%) | £1,000 |
| Total finance cost | £15,600 to £17,100 |
Add this to your acquisition costs and refurbishment budget. The property needs to increase in value by at least this amount (plus SDLT and other purchase costs) for the strategy to be profitable.
LTV and security
Most bridging lenders offer up to 70% to 75% LTV on the property's current value. Some will lend up to 100% of the purchase price if you can provide additional security (a charge over another property, for example).
The lender takes a first legal charge over the property. If you fail to repay, they can enforce the charge and sell the property to recover their money.
Exit strategy
The exit strategy is the most important element of a bridging loan application. The lender needs to see a clear, realistic route to repayment:
Refinance: you plan to refurbish the property, obtain a higher RICS valuation, and refinance onto a standard BTL mortgage. This is the core of the BRRRR strategy. The risk is that the valuation does not come in high enough to cover the bridge plus refurbishment costs, leaving you unable to refinance.
Sale: you plan to sell the property (or completed units) within the bridge term. The risk is that the market softens, the sale takes longer than expected, or the buyer's chain collapses.
If your exit fails, the bridging lender charges default interest (typically 2-4% above the standard rate) and may start enforcement proceedings after six months.
When bridging works
Auction purchases where you need 28-day completion. Light refurbishment projects (cosmetic upgrades, new kitchen and bathroom, EPC improvements) lasting three to six months. Properties that are unmortgageable in their current condition (no kitchen, structural issues, asbestos) and need work before a BTL lender will touch them. Chain-break situations where you need to complete on a purchase before selling another property.
When bridging is a bad idea
If you do not have a clear exit strategy, do not take a bridge. If the refurbishment scope is uncertain and could overrun, the additional interest at default rates will erode your profit. If the property's post-works value is not high enough to refinance at 75% LTV and recover your cash, the numbers do not work.
Run the numbers before committing. The spreadsheet does not lie.
Sources
- Bridging and Commercial. https://www.bridgingandcommercial.co.uk/ [Accessed 6 May 2026]