Guide · Bridging finance explained
What is a bridging loan?
A plain-English guide to how bridging loans work in the UK – what they are, what they cost, when they make sense and how one is arranged. Written by a lender, not a content team.
The definition
What a bridging loan is, in one paragraph
A bridging loan – also called a bridge loan or bridging finance – is a short-term loan secured against property. It exists to cover a gap in time: between buying one property and selling another, between an auction win and a mortgage completing, or between starting a project and refinancing it once the work is done. The lender takes a legal charge over the property, advances funds against its value, and the whole loan is repaid at the end of a short term – usually within twelve months, and almost always within two years.
The trade is simple: a bridging loan costs more per month than a mortgage, but it can complete in days rather than months and is assessed on the strength of the property and your plan to repay – not on a long affordability process. That is why it is the standard tool for property investors, landlords and businesses who need to move at the speed of a deal. Our bridging loans page covers Proxima’s own criteria in detail.
The mechanics
How a bridging loan works
Every bridge has the same four moving parts. The security is the property the loan is charged against – residential, semi-commercial, commercial or land. The valuation sets the figure the lender will lend against. The loan to value (LTV) is the loan as a percentage of that figure. Most lenders, Proxima included, go to around 75% on residential investment property and lower on commercial and land. And the exit is the event that repays the loan: a sale, or a refinance onto longer-term borrowing.
In practice the process runs: enquiry, decision in principle (from a few hours to a day with a lender who holds its own credit line), valuation and legals in parallel, then completion. A well-prepared unregulated case can complete in under two weeks; genuinely urgent cases faster. One number worth understanding early is the difference between the gross loan – the full facility including retained interest and fees – and the net advance that actually reaches you on day one. Our bridging loan calculator shows both.
Uses
What bridging loans are used for
Anywhere property needs funding faster than mainstream finance can move, or in a condition mainstream finance won’t touch. The most common cases:
- → Buying at auction inside the 28-day deadline
- → Buy-to-let, HMO and investment purchases before refinance
- → Refurbishing a property before sale or let
- → Buying property a mortgage lender won’t fund in its current condition
- → Commercial and semi-commercial acquisitions
- → Raising capital against equity in property you already own
- → Breaking a chain when a sale falls out of sync with a purchase
- → Business cash flow secured on commercial premises
The distinction
Regulated vs unregulated bridging
UK bridging splits into two regulatory categories, and the line is drawn by the property’s use – not by the borrower or the lender. If the loan is secured against a home you or an immediate family member live in, or intend to live in, it is a regulated bridging loan and falls under Financial Conduct Authority consumer rules. If the security is held for investment or business – a buy-to-let, an HMO, a commercial unit, land – the loan is an unregulated bridging loan, assessed on a commercial footing.
Most bridging in the UK is unregulated, because most bridges fund investment and business property rather than owner-occupied homes. Proxima Capital lends on unregulated bridging only – we do not offer regulated bridging loans, and if your case involves a home you live in or plan to live in, we will tell you straight away and point you towards an FCA-regulated adviser instead.
Cost
How interest is charged, and what a bridge costs
Bridging interest is quoted monthly, not annually – rates in the current market typically run from around 0.85% per month, depending on the asset, the loan to value, the charge position and the strength of the exit. It can be paid three ways: retained, where interest for the full term is deducted from the advance up front; rolled up, where it accrues and is repaid with the loan at the end; or serviced, where you pay monthly. Retained and rolled-up interest mean no monthly payments at all – the cost is settled when the exit completes.
Beyond interest, budget for an arrangement fee (commonly around 2% of the loan), a valuation and legal costs on both sides. A bridge is priced for months, not years – used for the right job on a sensible term, the cost is the price of speed and certainty; left to drift past its exit date, it becomes expensive quickly. The full breakdown, with worked examples, is on our bridging loan rates and costs page.
Assessment
What a lender needs to see
A bridging decision rests on four things, and preparing them before you enquire is the single biggest thing you can do to speed up your own completion:
The thing that matters
Exit strategies: how the loan gets repaid
A bridging loan is only as good as its exit. The two standard routes are sale – of the security itself or another asset – and refinance onto longer-term borrowing such as a buy-to-let or commercial mortgage once the property, or your position, qualifies for it. A credible exit is specific and evidenced: a realistic asking price against local comparables, or a refinance decision in principle from a term lender, not just an intention.
This is where a good lender earns its keep. We structure every case around the exit first; term length, interest treatment and LTV all follow from how and when the loan comes back. If the exit doesn’t stack up, we say so early rather than late, because a bridge without a credible way out is a problem for both sides of the table.
Judgement
Risks, and the alternatives worth weighing
The risks are important to name. The main one is a delayed exit: if the sale slips or the refinance stalls, interest keeps accruing at a monthly rate, and a default rate may apply beyond the term. The loan is secured, so your property may be at risk if you do not keep up repayments on a loan secured against it. The discipline that manages this risk is simple; borrow on a term with headroom, against an exit you can evidence, from a lender who pressure-tests the plan before completion rather than after.
Depending on your timeline, alternatives include a term or buy-to-let mortgage (cheaper, slower, condition-sensitive), a second charge behind an existing mortgage, or asset and invoice finance where the need is cash flow rather than property. If speed is not actually the constraint, a slower product is usually the cheaper answer and we will tell you so. How lenders and brokers differ and what that means for pricing is covered in our guide to bridging loan lenders and brokers.
Bridging with Proxima
Written by the people who make the decisions
Proxima was founded by highly experienced operators who have overseen in excess of £500m of property lending. We lend from £75k to £10m against investment and commercial property across England and Wales, with a prompt decision in principle within 24 hours and best-in-class solicitors and market-leading title indemnity to keep completion fast and certain.
Go deeper
Where to go next
The calculator
Model your gross loan, net advance and total cost in seconds.
FAQs
Bridging loan questions, answered
What is a bridging loan in simple terms?
It is a short-term loan secured against property, used to cover a gap in time – between buying and selling, winning at auction and completing, or finishing works and refinancing. You borrow against the property’s value for a matter of months, then repay the whole loan when your sale or refinance completes.
Is a bridging loan the same as a bridge loan or bridging finance?
Yes – bridging loan, bridge loan, bridging finance and bridge financing all describe the same product: short-term, property-secured lending that bridges a gap until a defined exit. The terms are used interchangeably in the UK market.
Is a bridging loan a mortgage?
Legally both are loans secured by a charge over property, which is why you sometimes hear “bridging mortgage”. The practical differences are term and purpose: a mortgage runs for years and is repaid monthly from income, while a bridge runs for months and is repaid in one event – a sale or refinance. Bridging is a tool for a transition, not a way to hold property long term.
What is the interest rate on a bridging loan?
Rates are quoted per month and in the current market typically start from around 0.85% pm for strong cases at sensible loan to values, rising with risk. On top of the rate, factor in an arrangement fee, valuation and legals. Because interest is monthly, the effective cost depends heavily on how long you actually hold the loan – which is why the exit matters more than the headline rate.
How quickly can a bridging loan be arranged?
A decision in principle can come within 24 hours; completion depends on the valuation, legals and the readiness of your paperwork. A clean unregulated case with responsive solicitors can complete in one to two weeks, and urgent auction deadlines faster still. The biggest variable is preparation on the borrower’s side – title, ID, and evidence for the exit.
Who can get a bridging loan?
Individuals, limited companies, LLPs and trusts can all borrow, and lending decisions rest primarily on the security and the exit rather than income multiples. Proxima lends on unregulated bridging only – property held for investment or business purposes in England and Wales. Your property may be at risk if you do not keep up repayments on a loan secured against it.
Ready to talk it through?
Tell us about your deal and you’ll get an honest, commercial view the same day direct from decision makers.
