Glossary
Bridging finance: Bridging loan
A short-term secured loan to buy quickly or fund works before a refinance or sale.
What it means
A bridging loan is short-term finance, usually for one to 24 months, secured on property. Investors use it to buy at auction, buy properties a mortgage lender won't touch, or fund a refurbishment before refinancing. Interest is charged monthly and is more expensive than a mortgage, so the exit, whether a refinance or a sale, must be clear from day one.
Worked example
ExampleA £90,000 bridge at 0.85% a month for six months with a 2% arrangement fee.
- Interest
- £90,000 × 0.85% × 6 = £4,590
- Arrangement fee
- £90,000 × 2% = £1,800
- Cost of the bridge
- £6,390
Every extra month adds £765. Delays on works or refinance cost real money.
Information, not advice. Example figures are fictional and for illustration only.