What is a bridging loan?
A bridging loan is a short-term loan secured against property. It "bridges" a gap: between buying and selling, between buying a property that can't yet be mortgaged and refinancing it once it can, or between needing cash now and having it later.
Bridging lenders care most about two things: the value of the security, and how you'll repay the loan at the end (your exit strategy). Because they're not lending on monthly income, a bridge can be agreed and completed far faster than a mortgage.
What can a bridging loan be used for?
- Auction purchases, where you usually have 28 days to complete. See auction finance.
- Chain breaks: buying your next investment before the last one sells.
- Unmortgageable property: no working kitchen or bathroom, short leases, non-standard construction.
- Refurbishment projects, from a light refresh to full conversion. See refurbishment finance.
- Below market value purchases, where you can borrow against the true value rather than the discounted price.
- Raising capital against property you already own, for a deposit, another purchase or business use. See refinance and capital raising.
- Developer exit, to repay development debt on a finished scheme. See developer exit finance.
Typical criteria
| Criterion | Typical position |
|---|---|
| Loan size | £75,000 – £3,000,000 |
| Maximum LTV, purchases | 75% |
| Maximum LTV, refinances | 70% |
| Second charge | up to 55% LTV |
| Term | up to 24 months |
| Interest | Retained, rolled up, part and part, or serviced |
| Security | Residential, semi-commercial, commercial, land with planning |
| Borrowers | Individuals, limited companies, LLPs; expats with a UK credit footprint |
| Location | England, Wales and Scotland |
| Experience | All levels considered, first-time investors included |
How much does a bridging loan cost?
Bridging interest is quoted monthly. On a strong residential case, rates start from around 0.87% a month; commercial and higher-risk cases cost more. On top of interest you'll typically see:
- Arrangement fee: usually 2% of the loan, added to the loan.
- Valuation: from £30 for an automated valuation on simple cases, a desktop valuation on houses and flats up to £500k, or a full survey on larger or complex property.
- Legal fees: both your solicitor and the lender's.
- Exit fee: some lenders charge one; many don't. We'll always tell you up front.
Most bridges retain or roll up the interest, so there's nothing to pay month to month. Use our bridging loan calculator for an illustration on your own figures.
How quickly can it complete?
A straightforward residential purchase with a desktop or automated valuation can complete in around two weeks. Most cases take two to four weeks. The things that slow a bridge down are almost always the valuation and the legal work. We instruct both the moment terms are agreed and chase every party until funds land.
Frequently asked questions
Is a bridging loan regulated?
It depends what the property is used for. A loan secured on a home you or a family member live in is regulated by the FCA. Loans on investment and commercial property for business purposes are not. Capitara only arranges unregulated, business-purpose bridging.
Can I get a bridging loan with bad credit?
Often, yes. Bridging lenders focus on the property and your exit rather than your credit score. Recent or unsatisfied defaults and CCJs will affect the rate and maximum LTV, so tell us about them at the start.
Do I need a deposit?
On a purchase you'll usually need at least 25% of the price, as most lenders cap borrowing at 75% LTV. You can sometimes reduce this by offering a second property as additional security.
What happens if I can't repay at the end of the term?
Speak to us early. Lenders can often extend a loan, or we can refinance onto another bridge or term loan. Leaving it until the deadline passes means default interest and fewer options.