What a bridging loan does that a mortgage can't

Most UK home moves follow a familiar rhythm: find a buyer, find a property, and hope the two chains line up. A bridging loan deliberately breaks that rhythm. It is short-term finance, usually secured against property, designed to cover the gap between buying and selling — or to let you complete quickly when a seller will not wait around.

In practice, that means one of two things. You buy your next home before your current one sells, then repay the bridge when the sale completes. Or you sell first, release the equity, and use bridging to secure the new property before the money from the old one lands. Either way, you remove the chain from the equation and stop your purchase depending on someone else's buyer behaving sensibly.

That freedom is real, but it is not free. Bridging is a specialist product with specialist costs, and it only works if you understand both the numbers and your route out of it.

When bridging genuinely makes sense

Bridging is at its best when speed or certainty is worth paying for. Common situations include:

• Buying at auction, where you have 28 days to complete and no time for a standard mortgage.
• Securing a property you love while your own sale is still progressing slowly.
• Buying a property that needs work and is not currently mortgageable in its present state.
• A seller who wants a fast exchange and will not accept a chain-dependent offer.
• Releasing equity from a property you own outright, without waiting for a sale.

Where bridging goes wrong is when it is used to paper over a problem that will still be there in six months — a property that will not sell, an uncertain income, or a plan that depends on everything going perfectly. A bridge buys you time. It does not fix the underlying issue.

What it actually costs

Bridging is priced monthly, and the headline rate is only part of the picture. Rates typically sit somewhere between around 0.6 per cent and 1.2 per cent per month, though they can be higher for complex cases. On top of that you will usually pay an arrangement fee of 1 to 2 per cent of the loan, a valuation fee, your own legal costs, and often an exit fee of around 1 per cent when the loan is repaid.

A worked example helps. On a £200,000 bridge at 0.85 per cent per month over six months, the interest alone is roughly £10,200. Add a 1.5 per cent arrangement fee (£3,000) and a 1 per cent exit fee (£2,000) and you are near £15,200 before valuation and legal costs. That is the price of chain-free certainty — worth it for some, eye-watering for others.

Two details catch people out. First, interest is often rolled up and added to the loan, so it compounds quietly; servicing it monthly usually works out cheaper. Second, if you are buying before you sell, you may face the higher rates of Stamp Duty Land Tax for additional dwellings — currently 5 per cent above the standard rate — although this can normally be reclaimed if you sell your previous main home within three years.

Your exit strategy matters more than the loan

Lenders will ask one question above all others: how will this be repaid, and when? Your answer — the exit — should be the first thing you work out, not the last.

Most exits are straightforward: the sale of your existing home, a residential mortgage arranged to replace the bridge, or the sale of the property itself once refurbished. What matters is that the exit is realistic and evidenced. If it depends on a sale, have a buyer lined up if you possibly can. If it depends on refinancing, check now that you will meet a lender's criteria at the end of the term, not just at the start.

Bridging terms are typically three to twelve months, and extensions are usually possible but come with fees. Assume the sale will take a month or two longer than you hope, and budget for it. Running out of time is expensive.

Regulated and unregulated bridging are different animals

If the loan is secured on the home you live in, or will live in, it is normally regulated by the Financial Conduct Authority. That brings affordability checks, clear disclosure of costs, and Consumer Duty protections. If it is secured on an investment property or a property you will not occupy, it is typically unregulated — faster and more flexible, but with fewer safeguards and more responsibility on you.

Either way, read the terms closely. Look for early repayment charges, how interest is calculated, what happens if you need extra time, and whether the lender charges for a further advance if costs run over.

Practical steps before you sign

• Work out your true total cost, including fees, interest and Stamp Duty, and compare it with simply waiting or renting temporarily.
• Get a clear valuation figure rather than assuming an estate agent's asking price is achievable.
• Confirm your exit route in writing, with dates and contingencies.
• Speak to a whole-of-market adviser who handles bridging, not just standard residential mortgages.
• Have a Plan B if the sale slips, the refurbishment overruns, or the refinance falls short.

Used carefully, bridging is one of the most useful tools in UK property finance. It turns a stressful chain into a manageable sequence of dates. Used as a stopgap for a plan that does not quite work, it becomes an expensive way to buy time. Get the exit right first, and the rest tends to fall into place.