Bridging finance
Bridging finance
Short-term funding that moves at the speed of the deal — buy at auction, break a chain, fund works, or release equity while longer-term finance is arranged. Bridging is a tool for when the opportunity won't wait, and the only way to use it well is to know exactly what it costs.
Tera is a credit broker, not a lender. Any finance is subject to status and the terms of the finance provider.
What is a bridging loan and when should you use one?
A bridging loan is short-term finance — usually 3 to 24 months — secured against property, designed to "bridge" a gap between a purchase and a longer-term event: a sale, a refinance, or completed works. Typical uses: auction purchases with 28-day deadlines, buying before selling, refurbishing a property a mortgage lender won't touch yet, or raising working capital quickly against property you own. It's more expensive than a mortgage, so the golden rule is simple: bridging should always have a clear way out — the exit — before it has a way in.
How is bridging loan interest charged?
Bridging is priced monthly, not annually — typically around 0.75%–1.25% per month — and there are three ways to pay it. This choice changes both your monthly outgoings and how much you actually receive on day one, which is why we show all three side by side.
Retained — interest for the whole term is calculated upfront and deducted from the loan on day one. Nothing to pay monthly, complete certainty, but you receive less at the start.
Rolled-up — interest compounds monthly and is repaid in one sum at exit. Nothing to pay monthly, and you receive more on day one than retained, but compounding makes it the most expensive if the loan runs full term.
Serviced — you pay interest monthly like a mortgage. The cheapest overall and you receive the most on day one, but the lender must be satisfied you can afford the payments.
What does a bridging loan really cost?
This is the question that matters, and the one this market is worst at answering. Here's a fully itemised representative example — the same maths our bridging true-cost calculator runs on your own numbers.
A £300,000 gross loan against a £500,000 property (60% LTV), 12-month term, 0.95% per month, retained interest:
| Item | Amount |
|---|---|
| Retained interest (12 months) | £34,200 |
| Arrangement fee (2%) | £6,000 |
| Exit fee | £0 (some lenders charge 1%+ — always check) |
| Valuation | ~£1,250 |
| Legal costs (yours + lender's) | ~£2,000 |
| Tera broker fee | £0 — we're fee-free |
| Total cost of finance | ~£43,450 |
| You receive on day one | £259,800 |
Note that last line: with retained interest you receive the net advance, not the gross loan. Plenty of borrowers discover that at completion. You shouldn't. As an annualised percentage of the money actually received, this example works out at roughly 16–17% a year — which is the honest number to compare against any other funding route.
How much can you borrow with bridging?
Most lenders go to 70–75% of the property's value (loan-to-value); some stretch higher with additional security. The property can be residential investment, commercial, semi-commercial or land with planning. On a £500,000 property, 75% LTV means a maximum gross loan of £375,000 — and remember that fees and retained interest come out of that gross figure.
How fast can a bridging loan complete?
Days, not months — that's the point of the product. With a responsive lender, a proactive solicitor and clean title, 5–14 days is realistic; auction deadlines of 28 days are routine. The biggest delays are avoidable: slow legal responses and missing paperwork. We keep deals moving because a bridge that completes after the deadline is worthless.
What exit strategies do lenders accept?
Every bridging application stands or falls on the exit. Lenders want one of: sale of the security property (or another asset), refinance onto a term mortgage — ideally with evidence you'd qualify — or completion of works leading to either. The stronger and more evidenced your exit, the better your rate. If your exit is refinance, we'll often line up the term facility at the same time as the bridge, so one conversation covers both ends.
Is bridging finance regulated?
Bridging secured on business premises, investment property or land is unregulated — that's what this page and our calculator cover. If the loan would be secured against a home you or your family live in, it's a regulated mortgage contract with different rules and protections — contact us and we'll guide you through the regulated route with our principal firm.
Why arrange bridging through Tera?
Bridging is the market where broker fees hide most easily — 1–1.5% fees are common, which on the example above would be £3,000–£4,500 added quietly to your costs. Tera charges you nothing. We're paid a disclosed commission by the lender, we itemise every cost before you commit, and because we broker whole-of-market we're comparing lenders' total cost — not just the headline monthly rate that makes an expensive loan look cheap.
Bridging finance FAQs
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