What is a bridging loan?
A bridging loan is a short-term loan secured on property, usually for between a few months and two years. Interest is charged monthly, and the loan is repaid in one go when you sell a property or refinance onto a longer-term mortgage. That repayment plan is the exit, and lenders care about it as much as the property itself.
Regulated or unregulated?
| The property is… | The bridge is usually… |
|---|---|
| A home you or a close family member live in, or will live in | Regulated by the FCA, and must be arranged by an authorised firm |
| A buy-to-let, HMO, block, commercial or development property | Unregulated (business purpose) |
DAS Finance is authorised and regulated by the Financial Conduct Authority, so we can arrange both. See regulated bridging loans for buying a new home before you sell.
How landlords use bridging
- Buying before a mortgage is possible: auction lots with a 28-day completion, and properties a mortgage lender won’t accept yet, such as no kitchen, no bathroom or a short lease.
- Refurbish, then refinance: bridge the purchase and the works, then remortgage onto a buy-to-let at the new value. Some lenders will do this within six months on the current value.
- Bridge-to-let: a bridge with a buy-to-let mortgage as the planned exit, often agreed with the same lender at the outset.
- HMO and block conversions: funding the purchase and conversion before an HMO mortgage or block mortgage takes over.
- Moving into a limited company: where timing is tight, a bridge can fund a purchase while the company mortgage is arranged. See transferring property to a limited company.
- Chain breaks: buying the next property before your sale completes.
- Finishing a development: development exit finance repays the build loan and gives you time to sell.
What bridging costs
| Cost | Typical range |
|---|---|
| Interest | About 0.6% to 1.2% a month |
| Arrangement fee | Usually 1% to 2% of the loan |
| Exit fee | None on many loans; up to 1% on some |
| Valuation and legal fees | Paid by you, case by case |
Interest can be retained (held back from the loan for the term), rolled up (added to the balance) or serviced (paid monthly). Each changes how much cash you receive on day one; the bridging loan calculator shows the true cost of each. Ranges are indicative only and every case is priced by the lender.
How much can you borrow?
Most bridging lenders lend up to about 70–75% of the property’s value, including fees and any retained interest. More is possible with additional security, such as a charge over another property you own. Works funding can sit on top for refurbishment cases.
Plan the exit first
The cheapest bridge is the one you get out of on time. If your exit is a refinance, check the mortgage before you take the bridge: will the rent pass the lender’s test, and at what value? The buy-to-let mortgage calculator shows how much the rent supports. If it’s a sale, be realistic about price and timescale, and allow a buffer in the term.
Why use DAS Finance for bridging
We arrange the bridge and the mortgage that repays it, so the two are planned together: the bridging term matches the refinance timetable, and the exit lender is lined up before you commit. Every case is subject to the lender’s underwriting, valuation and criteria.
Bridging loans are secured on property. Your property may be repossessed if you do not repay the loan or keep up any payments.
Frequently asked questions
What is a bridging loan?
A short-term loan secured on property, usually for a few months up to two years, repaid in one go when you sell or refinance onto a longer-term mortgage.
Is a bridging loan regulated?
It is regulated when it is secured on a home that you or a close family member live in or will live in. Bridging on buy-to-let, commercial or development property is usually unregulated.
How much does a bridging loan cost?
Typically about 0.6% to 1.2% a month in interest, plus an arrangement fee of around 1% to 2% and valuation and legal costs. Some loans also have an exit fee.
Can a bridging loan be repaid with a buy-to-let mortgage?
Yes. Refinancing onto a buy-to-let mortgage is one of the most common exits. We check the mortgage at the same time as the bridge so the rent test and value work before you commit.