Property development bridging loans
Flexible, short-term finance that could help turn your property plans into reality.
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What is a property development bridging loan?
Whether you're flipping a house, converting a building, or funding a new build, a bridging loan for property development can give you fast access to capital when time is of the essence.
These are a short-term loans you can use to buy, renovate, or build a property before long-term finance is available. They “bridge the gap" between a property's current state and its future value. You might need funds to buy an uninhabitable property, carry out structural work, or finish off a half-completed project.
Traditional lenders don't always move quickly or offer finance on non-standard properties - bridging loans can help there too. They're flexible, fast, and tailored to your project's needs.
When to use a bridging loan for development
Bridging finance is popular with property developers, investors, and even self-builders, thanks to the speed. You can use it for:
- Buying property that needs major work
- Paying for conversions (e.g. commercial to residential property)
- Funding developments when a mortgage isn't yet an option
- Buying land with planning permission
- Bridging gaps between build stages or before sale
Let's say you buy a run-down terraced house in Leeds with no kitchen or bathroom - unmortgageable in its current state. You could use a bridging loan to buy and refurbish the house, then switch to a buy-to-let mortgage once it's ready to let out. The entire process might take around six months, and the increased property value could make refinancing easy.
Another common use is when planning permission has been granted, but you need funds to start building before other finance kicks in. Bridging loans can be drawn down in stages (known as "tranches") to match your build schedule, helping manage costs and cash flow.
Bridging loan costs and how to manage them
Although bridging loans are typically interest-only, meaning you only the interest during the loan term, it's usually charged monthly (not annually like mortgages). The amount will depend on factors like your credit history and the scope of the project. You may also face arrangement fees, exit fees, valuation fees, broker fees, and legal fees.
These loans are usually repaid in 18 months or less through a property sale, long-term mortgage, or other refinance option. That's why having a strong exit strategy - a clear plan for how you'll pay it off - is vital. If delays happen (as they often do in development), the cost of interest can quickly mount up.
One way to manage costs is to "roll up" interest, meaning you don't make monthly interest payments - instead, the interest is added to the loan and paid off at the end. This is useful if your project isn't generating income yet, but it also increases your final repayment amount.
Summing up
Bridging loans offer speed and flexibility for property development that other types of finance often can't match. They can be ideal for investors and developers who need short-term funding to buy, renovate, or build - as long as there's a clear plan to repay. With the right advice and planning, they can help you bring your property vision to life.
Frequently Asked Questions
How much can I borrow with a property bridging loan?
The loan amount depends on several factors, including the value of the property and the lender's criteria. Most bridging lenders offer up to 75% loan-to-value (LTV), though some may go higher with extra security. For a property development loan, lenders will consider the project costs and end value, and the amount may be influenced by the property type and location, as well as your financial situation.
Can I get a bridging loan for a full property build?
Yes, many lenders offer development bridging loans for ground-up builds. You'll typically need detailed plans, planning permission, and a schedule of costs. Funds are often released in stages as the build progresses. The lender will want to know your experience and how you'll repay the loan once the project is complete.
How fast can I get bridging finance for development?
Speed is crucial with property development finance. With the paperwork and legal documents ready, you could have your bridging funds in 5-10 days. Timescales depend on the lender, property type, and whether valuations and legal checks are straightforward. A good bridging loan broker can help move things along by handling the details and liaising with all parties.
Do I need experience in property development to qualify?
Not always, but experience definitely helps. Some bridging loan lenders will consider first-time developers, especially if you have professionals (like architects or project managers) on board. More complex or high-value projects usually require some track record to reassure the lender that you can deliver and stay on budget.
What's the difference between an open and a closed bridging loan?
An open bridging loan has no fixed repayment date - it's typically used when the borrower is confident they'll repay soon but doesn't have an exact timeline. A closed bridging loan has a set repayment date, usually because the borrower has a clear exit strategy, like a property transaction that's near completion. Closed loans are often considered less risky and may come with lower interest rates.
What's the difference between a regulated and unregulated bridging loan?
A regulated bridging loan is overseen by the Financial Conduct Authority (FCA) and is typically used for residential property. These loans offer more consumer protection. An unregulated bridging loan is used for investment, commercial, or semi commercial properties. They're not subject to the same level of oversight, making them more flexible but also riskier for the borrower.
What's a second-charge bridging loan?
A second-charge bridging loan is secured against a property that already has a primary mortgage or loan in place. It allows borrowers to access extra funds without refinancing the original loan. As a secured loan, the existing property can be sold by the lender if you default, but the original (first-charge) lender must be paid first.
About the author
Lawrence Howlett
Lawrence Howlett brings a results-driven mindset to his writing, shaped by over a decade of experience across finance, legal, and energy sectors. As the founder of Moneysavingadvisors, he’s built a reputation for turning complex financial concepts into clear, actionable insights for consumers. His writing stands out for its clarity, structure, and focus on delivering value.
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