Yes, banks do offer bridging loans, but not all of them, and the terms vary widely
A bridging loan is a short-term loan that covers a gap between two events—usually the purchase of a new property before you've sold an existing one, or the need for cash before a larger loan closes. Banks do make these loans, but they're not a standard product like a checking account. You'll typically find them through commercial lenders, mortgage brokers, or specialist bridging firms rather than by walking into your local branch.
The loan is secured against the property you're buying or the one you already own. The bank holds a legal claim on that property until you repay the loan, which usually happens when your main mortgage funds, your sale completes, or a set deadline arrives—typically three to twelve months out. Interest rates are higher than standard mortgages because the risk is higher and the loan period is short.
Not every bank offers bridging loans. Large national banks may have mortgage divisions that do, but community banks and online-only banks rarely do. If your bank doesn't offer them, a mortgage broker can connect you with lenders who do, or you can search for bridging loan specialists directly.
Key Takeaways
- Bridging loans are short-term loans secured against property, designed to cover the gap between buying one property and selling another or waiting for a main loan to close.
- Not all banks offer bridging loans; you may need to work with a mortgage broker or specialist lender instead of your primary bank.
- Interest rates on bridging loans are significantly higher than standard mortgages because the loan is temporary and carries more risk.
- The loan term is usually three to twelve months, and you repay it when your main mortgage funds, your property sale completes, or the deadline arrives.
- You'll need to prove you have a realistic plan to repay the loan—either a confirmed sale, a mortgage offer, or another source of funds.
How banks decide whether to lend you a bridging loan
Banks and bridging lenders care most about one thing: how you'll repay them. They want to see either a confirmed sale of your current property, a mortgage offer on the new one, or another reliable source of funds. If you're buying a new home before your old one sells, the lender will want proof that your old home is on the market and has a realistic sale price.
They'll also check your credit history and income, but less strictly than they would for a standard mortgage. Because the loan is short-term and secured against property, your personal finances matter less than your exit strategy. If the property itself is worth enough to cover the loan amount, that's often enough.
You'll need to provide documentation: proof of the sale (or listing), the mortgage offer for the new property, recent bank statements, and details of any other debts. Some lenders ask for a surveyor's report on the property being purchased. The process usually takes one to three weeks, faster than a standard mortgage but slower than online personal loans.
What bridging loans cost and what fees to expect
Interest rates on bridging loans typically range from 0.5% to 2% per month, or 6% to 24% per year, depending on the lender, the loan size, and how secure the lender feels about repayment. That's substantially higher than a standard mortgage (usually 3% to 7% annually), but the loan is only for a few months, so the total interest paid is often manageable.
Beyond interest, expect these fees: an arrangement fee (usually 1% to 3% of the loan amount), a valuation fee (typically $300 to $800), legal fees (often $500 to $1,500), and an exit fee when you repay (usually 1% to 2% of the loan amount). Some lenders charge a monthly administration fee as well. Add these up before you commit—a $200,000 bridging loan with a 2% arrangement fee, $1,000 in legal costs, and $500 valuation fee starts at $5,500 in upfront costs alone.
Interest accrues daily, so the longer you hold the loan, the more you pay. If you plan to repay in three months, calculate the interest for three months, not twelve. Some lenders let you roll interest into the loan balance (you pay it back later), while others require monthly payments. Ask which applies before you sign.
When banks won't lend and what to do instead
Your bank may decline a bridging loan if your sale isn't confirmed, if the property value is too low relative to the loan amount, or if you have poor credit or unstable income. Some banks simply don't offer them at all.
If your bank says no, contact a mortgage broker who specializes in bridging loans. Brokers have access to multiple lenders and can often find one willing to lend when banks won't. Specialist bridging firms (companies that do nothing but bridging loans) are another option; they're often more flexible on credit history and exit strategy, but their rates are usually higher.
If you can't get a bridging loan, alternatives include a personal loan (if the amount is small enough), a home equity line of credit against your current property, or delaying the purchase until your sale completes. A personal loan is faster and doesn't require property as security, but the interest rate is usually higher and the maximum amount is lower. A home equity line of credit uses your current home as collateral, so it's cheaper than a bridging loan but takes longer to set up.
How repayment works and what happens if you can't repay on time
You repay a bridging loan in one lump sum, not monthly installments. The repayment date is set when you take out the loan—usually when your property sale is expected to complete, when your main mortgage is expected to fund, or at a fixed deadline you agree to. The lender will contact you before the deadline to confirm repayment arrangements.
If your sale falls through or your main mortgage doesn't close on time, you have a problem. Most bridging loans allow a short extension (usually 30 days) without penalty, but after that, late fees kick in—typically 1% to 2% of the loan amount per month. If you still can't repay after the extension, the lender can take legal action to recover the money, which may include selling the property you've pledged as security.
To avoid this, be realistic about timelines when you apply. If your sale is uncertain, tell the lender upfront and ask about extension terms. If you have another source of funds (savings, a family loan, a personal loan), mention it as a backup plan. Lenders are more willing to extend if they believe you're working toward repayment rather than avoiding it.
Bridging loans versus other short-term borrowing options
| Loan Type | Interest Rate Range | Typical Term | Security Required | Best For |
|---|---|---|---|---|
| Bridging loan | 6% to 24% annually | 3 to 12 months | Property | Buying before selling, waiting for main mortgage |
| Personal loan | 6% to 36% annually | 2 to 7 years | None (unsecured) | Smaller amounts, faster approval |
| Home equity line of credit | 4% to 12% annually | 5 to 20 years | Current home | Lower cost, flexible repayment |
| Credit card | 15% to 25% annually | Ongoing | None | Very small amounts, immediate access |
A personal loan is simpler and faster if you need less than $50,000 and don't want to pledge property as security. The interest rate is usually higher than a bridging loan, but you don't pay arrangement fees or valuation fees, and repayment is spread over years rather than months, so monthly payments are lower. The downside: the total interest paid over the full term is often higher.
A home equity line of credit is cheaper than a bridging loan if you own your current home outright or have significant equity. You can draw money as you need it, and you only pay interest on what you borrow. The catch: it takes four to six weeks to set up, so it won't help if you need money immediately.
Questions to ask your bank or lender before you commit
Before you sign a bridging loan agreement, get clear answers to these questions: What is the exact interest rate, and does it change if I extend the loan? What fees apply, and when are they charged? Can I repay early without penalty? What happens if I miss the repayment deadline—how long is the extension, and what are the late fees? Is interest rolled into the loan or paid monthly? What documents do I need to provide, and how long will approval take?
Ask about the exit strategy too: if my sale falls through, can I refinance into a standard mortgage instead? If my main mortgage is delayed, will you extend automatically or do I need to ask? These details matter because they affect your total cost and your options if circumstances change.
Frequently Asked Questions
Can I get a bridging loan if my credit score is poor?
Yes, it's possible. Bridging lenders care more about the property value and your repayment plan than your credit history. Specialist bridging firms are more flexible on credit than banks. However, a poor score may mean higher interest rates or stricter terms. Ask the lender upfront whether your credit will affect approval or cost.
What if I sell my old property before the bridging loan is due?
You can repay the bridging loan early using the sale proceeds. Most lenders don't charge a penalty for early repayment, but check your agreement first. Once you repay, the lender releases the legal claim on the property, and you're done.
Do I need a mortgage offer before I apply for a bridging loan?
Not always, but it helps. If you're buying before selling, the lender wants to know you can repay when your sale completes. A mortgage offer on the new property or proof that your old property is listed and realistically priced can substitute. Ask the lender what evidence they need.
Can I use a bridging loan to buy an investment property?
Yes. Bridging loans work the same way for investment properties as for homes you'll live in. The lender will still want proof of your exit strategy—either a confirmed sale of another property or a mortgage offer on the investment property itself.
What's the difference between a first charge and second charge bridging loan?
A first charge loan means the bridging lender has the first legal claim on the property if you can't repay. A second charge means another lender (usually your main mortgage lender) has the first claim. Second charge loans are riskier for the lender, so they cost more. Most bridging loans are first charge.