UK Bridging Loan Calculator

How Bridging Loans Work in the UK

A bridging loan is a short-term secured loan used to "bridge" a financial gap — most commonly between buying a new property before selling an existing one. Regulated by the Financial Conduct Authority (FCA) under the Financial Services and Markets Act 2000, UK bridging loans typically run for 1 to 24 months and are secured against residential or commercial property. The loan is repaid in a single lump sum (the "exit") rather than monthly instalments, making it fundamentally different from a standard mortgage.

There are two main structures: a closed bridge has a fixed repayment date — usually tied to a confirmed property sale exchange — and typically attracts a lower rate because the exit is certain. An open bridge has no fixed repayment date and carries slightly higher rates to reflect the additional risk. Both require a credible exit strategy, which lenders scrutinise closely before approving funds.

Loan-to-value (LTV) is a key metric. Most UK bridging lenders cap at 75% LTV on a first-charge basis, although some specialist lenders extend to 80% in certain circumstances. Higher LTV generally means a higher monthly interest rate. Source: fca.org.uk — mortgages and secured lending.

Bridging Loan Costs Explained — Interest, Fees & Hidden Charges

Unlike mortgages, bridging loan interest is quoted monthly, not annually. Typical rates in 2026 range from 0.4% to 1.5% per month depending on LTV, security type, and borrower profile. There are three ways interest can be structured:

• Retained interest — the lender calculates the total interest for the full term upfront and deducts it from the gross loan advance. You receive the net amount immediately. No monthly payments are required, but you pay interest on money you haven't received.
• Rolled-up interest — interest accrues monthly and is added to the loan balance. You repay the full amount plus compounded interest at exit. Cash-flow-friendly during the term, but the total repayable amount is higher.
• Serviced monthly — you pay the interest each month, keeping the principal flat. The lowest total cost option if you have the cash flow to service payments.

Beyond interest, typical fees include: an arrangement fee (1–2% of the loan), an exit fee (0–1%), a valuation fee (£500–£1,500), and legal fees (£1,000–£3,000 for lender's solicitor — you also pay your own solicitor separately). Some lenders charge an administration or drawdown fee. Always request a full cost illustration from your broker or lender before committing.

When to Use a Bridging Loan vs a Mortgage

A bridging loan is a tool of timing, not long-term finance. The most common use cases include: completing a property purchase before your existing home has sold; buying at auction (completion typically required within 28 days); financing heavy refurbishment works that make a property unmortgageable; and funding commercial property acquisitions that require speed over rate.

The monthly cost of a bridging loan is significantly higher than a standard residential mortgage. A £300,000 loan at 0.75% per month costs £2,250 in monthly interest — compared to roughly £1,650 per month on a 25-year repayment mortgage at 4.5%. Over a 12-month bridge, the total interest alone is £27,000. This calculator lets you model the true cost so you can make an informed decision about whether bridging finance is right for your situation.

If your exit strategy is uncertain, or if you need finance for longer than 24 months, a mortgage or development finance facility is almost always more cost-effective. Speak to an FCA-authorised mortgage broker who can access the whole market before making any commitment.