Table: sorted by monthly interest rate
If you need short-term finance for a property purchase, whether it’s to bridge a gap between buying and selling your main home or to snap up a bargain at auction, then a bridging loan is probably what you’re after. Our guide explains the facts about bridging loans and helps you compare the market.
Bridging loans started out as short-term loans which could be used by home buyers who had found a home they wanted to buy, but hadn’t yet found a buyer for their current home that they live in and want to sell.
Essentially, these loans “bridge” the gap between the sale of a current home and the purchase of a new one.
But these days, they’re more commonly used when a property is being developed – to bridge the gap between purchase of a premises and being able to live in it (once it’s mortgageable), sell it, or rent it out. They act like a short-term mortgage, but rather than having monthly repayments, you make one big repayment after a set period.
Typically, bridging loans are aimed at property developers and landlords, who are in the real estate industry. But they can be used in several different circumstances including:
For example, let’s say you own a home worth £250,000 and have £100,000 remaining to pay off on the mortgage.
The new home you want to buy costs £400,000 but you need to move into the house within two months.
Selling your existing home in that time frame isn’t realistic and even though you have £15,000 in savings to cover the expenses and fees, you still need the money to buy the new home.
This is where a bridging loan can help cover the time until you sell your current home.
Learn more about the differences between open and closed bridging loans.
Bridging loans are typically a stop-gap measure for a short period of time. As a result, most bridging loans come with higher interest rates than you might get on a traditional mortgage and are often advertised as the rate per month. For example, a rate of 1.5% a month translates to 18% APR.
Bridging loans also often come with hefty administration fees. For example, a fee of 1% to arrange the loan and another 1% to exit from it would add £3,000 to a £150,000 loan, before you even take interest into account.
| An overall representative example for regulated bridging loans | |
|---|---|
| Based on borrowing | £195,000 over 1 year |
| Interest rate | 8.40% p.a. (fixed) |
| Lender fee | £3995.00 |
| Overall cost of comparison | 11.6% APRC |
| Broker fee | £995 |
| Total amount repayable | £211,799.16 inc. interest of £16,799.16 |
Bridging loans tend to be offered by specialist loan providers rather than traditional high street mortgage lenders. They are not as widely available as mortgages. But as with mortgages, there are brokers in the bridging loan market who will be able to advise you on what the best loan would be for your particular circumstances.
The following companies offer bridging loans. Below we have written a short summary for each one and the basics of the bridging loans that are on offer.
Greenfield has been lending since 2009, and specialises in bridging loans. The company operates in England and Wales, offering loans of between £26,000 and £5 million. Maximum LTV is 70% and terms of up to 12 months are available. Funds can be released within seven days and there are no minimum income requirements.
Founded in 2008, LendInvest is a property finance company, with its loan book funded by big institutional investors. Its products range from buy-to-let mortgages to bridging loans, and you can apply to LendInvest through a broker or directly. Bridging loans go up to a maximum of £15 million and a 75% LTV.
Funding 365 is one of the UK’s largest independent bridging lenders, and has been in the market since 2013. It offers bridging loans of between £100,000 and £10 million, and an LTV of up to 75%. Its loan terms vary from 3 months up to 24 months, and you can contact this provider either directly or through a broker.
It may have gained its banking licence in 2016, but digital bank Masthaven has actually been offering secured lending and bridging loans since 2004. You can only access Masthaven Bank’s bridging loans through a specialist broker (its website will direct you to a search for one in your local area). Bridging loans of up to £1 million are available for a term of up to 18 months.
Development and bridging finance specialist Oblix Capital was established in 2014. It offers different types of bridging loans, which range from £50,000 to £5 million in value, based on a maximum LTV of 75%. Oblix Capital has a focus on property developers and investors, and says that it can give a Decision in Principle on a bridging loan in three hours.
Active in the market since 2005, Octopus Real Estate provides both residential and commercial bridging loans through brokers. On the residential side, loans can go up to 70% LTV on a term of up to 23 months. It’s a similar story on the commercial side, with a maximum LTV of 70% on a term of up to 24 months, and a maximum loan value of £25 million.
Tuscan Capital provides short-term bridging finance for properties in England and Wales. It only deals with unregulated, commercial bridging loans, so isn’t able to offer residential bridging loans to homeowners. It focuses on applications from brokers and investors, with loans starting from £150,000 up to a maximum of 75% LTV.
United Trust Bank is a specialist UK lender with a bridging loans division, which is broker-focused. The bank’s loans are available to individuals (there is no upper age limit), as well as to corporate and trust borrowers. It offers loans starting at £75,000 up to a maximum of £15 million, with a maximum LTV of 60%. Loans are available for properties in England, Scotland and Wales, on both a first and second charge basis, with interest calculated daily.
It is usually quicker to organise and receive a bridging loan than it is a mortgage, as they are designed for short-term borrowing. It normally takes a few weeks to process an application, but in some cases it only takes a few days. However, providers will still conduct thorough financial checks before lending to you.
Bridging loans can start from around £5,000 and go up to £250 million. The amount you will be able to borrow will depend on your personal financial circumstances and the value of the property you are borrowing against. Most providers will also only lend on a maximum loan-to-value (LTV) ratio of 80%.
A bridging loan should be considered as an option of last resort due to its high interest rates and fees, and the uncertainty of knowing whether you’ll be able to pay it off after the sale of an existing property.
Some alternatives to bridging loans include:
We contacted the banks below to ask if they offered bridging loans and collected the responses.
| Provider | Policy regarding bridging loans |
|---|---|
| Nationwide | Not offered |
| HSBC | Not offered |
| RBS | Not offered |
| Lloyds Bank | Not offered |
| Santander | Not offered |
The best bridging loans company for you will be the one with a product and a lending process that meets your individual needs. So when you’re researching which company to go with, bear in mind the following points:
Everything you need to know about commercial bridging loans. We look at when they’re useful, how they work and what to be aware of before taking one out.
In-depth guide to bridging loans if you have had credit problems in the past, including what lenders are willing to overlook and which are the most important factors.
Complete guide to buying at auction with a mortgage. Find out which types of properties could be unmortgageable and how to get your finances in place before the auction.
How to buy a repossessed property and what the risks and benefits are. Plus, where to look for properties, buying at auction and issues to look out for.
The complete guide to property auctions, including how the process works and the checks to make on the properties you want to bid on.
Discover if a short term mortgage is a right option for you depending on your circumstances.
Buy-to-sell mortgages (also called bridging loans) are designed for buyers who are looking to sell on a property within a relatively short time-frame. Read our guide and compare rates.