Bridging loans come in two types – open and closed.
While both provide short-term property finance, they work quite differently in practice.
With a closed bridging loan, you agree to a fixed repayment date with your lender upfront. You’ll need solid proof of when and how you’ll repay – like signed contracts from a property sale or confirmation of incoming funds.
Because lenders have this certainty, they often offer better interest rates.
Open bridging loans don’t lock you into a specific repayment date.
While you still need a clear repayment plan, you’ve got more flexibility on timing. This suits situations where you can’t pin down exact dates – like when you’re selling a property but haven’t found a buyer yet. You’ll typically pay higher rates for this flexibility.
In this guide, we’ll examine how these options differ, what each costs, and which might work best for your situation. Whether you’re buying at auction, breaking a property chain, or need fast finance for another reason, understanding these differences helps you make a smarter choice.
What is a Bridging Loan?
A bridging loan gives you quick, short-term property finance.
The loans are approved fast but still need to be secured against property.
They last between a few months and two years. You might use one to buy at auction, where you need to complete within 28 days. Or perhaps you’ve found your ideal next home but your current property hasn’t sold yet. Rather than losing your dream home, a bridge loan lets you proceed while your sale completes.
While traditional mortgages often take weeks or months to arrange, bridge loans can complete in days or weeks.
This speed and flexibility costs more than standard mortgage rates, which is why having a solid repayment plan (exit strategy) matters so much.
Read more: A Guide to Bridging Loans
Understanding Open Bridging Loans
An open bridging loan doesn’t lock you into a specific repayment date.
Yes, you’ll need a clear plan to repay, but you’ve got more wiggle room on timing. This flexibility proves invaluable when you can’t pin down exact dates.
Think about selling your current home.
You know it will sell – that’s your repayment plan – but you can’t guarantee exactly when. An open bridge gives you that extra flexibility while you find a buyer.
Get access to expert brokers and specialist bridging lenders
When to Consider an Open Bridge
Most bridging loans are ‘open’ and this works well when timing isn’t certain.
Maybe your property’s on the market but hasn’t sold. Perhaps you’re seeking planning permission before selling. You might be renovating a property and can’t predict exactly when works will finish.
Picture this: you’ve spotted your perfect next home, but your current property hasn’t found a buyer yet. You don’t want to miss out, but you also can’t say exactly when your sale will complete.
An open bridge could help you secure that new home while giving you time to sell your existing property properly.
Understanding Closed Bridging Loans
With a closed bridging loan, you and your lender agree on a specific repayment date from the start.
This option makes sense when you know exactly when money’s coming in – perhaps from a property sale where you’ve already exchanged contracts.
Lenders like closed bridges because they’re more predictable.
Thanks to the reduced risk that comes with a fixed end date, you’ll often find better interest rates with closed bridges compared to open ones.
When a Closed Bridge Makes Sense
Auction buyers often choose closed bridges – they know they need funds for exactly 28 days.
Similarly, if you’ve exchanged contracts on a property sale, you’ve got a fixed completion date. Maybe you’re waiting for an agreed pension payout.
In these situations, a closed bridge fits perfectly because you can prove exactly when and how you’ll repay.
Let’s say you’re buying a property at auction. You know you’ll complete in 28 days, and you’ve got a mortgage lined up that will be ready by then. A closed bridge works perfectly here – you can show the lender exactly how and when you’ll repay.
Key Differences Between Open and Closed Bridges
The main differences go beyond just having a set end date.
With a closed bridge, you’ll need solid proof of your repayment plan – like those signed property sale contracts we mentioned. Open bridges still need a clear repayment strategy, but there’s more flexibility around timing.
Because closed bridges offer more certainty, lenders see them as safer bets.
This means better terms for you.
While both types of loans are short-term, closed bridges typically wrap up faster than open ones. You’ll also find the application moves quicker with a closed bridge because you’re providing concrete evidence of your repayment plan upfront.
Understanding the Costs
Both open and closed bridges involve similar costs.
Lenders charge arrangement fees as a percentage of your loan. While these fees are often similar for both types, some lenders charge more for open bridges due to the extra uncertainty.
You’ll need property valuations and legal work regardless of which type you choose. Many lenders don’t charge for early repayment, but always check this detail before signing.
Making Your Choice: Open or Closed Bridge
Your situation will point you toward the right choice.
When you’ve got guaranteed funds coming on a specific date – like a property sale that’s exchanged contracts – a closed bridge makes sense.
You’ll get better rates because the lender can see exactly when they’ll get their money back.
But what if you’re less certain about timing?
Maybe you’re selling a property but haven’t found a buyer yet. In this case, an open bridge gives you valuable breathing space. Yes, you’ll pay more for this flexibility, but it could save you stress if your plans take longer than expected.
Think about how certain you are about your repayment timing.
While better rates from a closed bridge might look tempting, be honest about any uncertainty. If there’s a real chance things might take longer than expected, an open bridge could be your safer option.
Getting Your Bridge Loan Approved
Whether you choose open or closed, you’ll follow a similar path to approval.
Start by talking with a broker about what you need. They’ll want details about the property you’re using as security – its value, condition, and location all matter.
Here’s where open and closed bridges really differ: proving how you’ll repay.
With a closed bridge, you’ll show evidence like exchange contracts or confirmation of incoming funds. Open bridges need a clear plan too, but with more flexibility on exact dates.
Your broker can approach a lender and obtain a decision in principle.
If you’re happy with the terms then a full application can be submitted along with fees. Loans can be approved in 5 -10 days but the completion date is often down to the speed of your solicitor.
Next Steps
While using a broker isn’t required, they do make the process smoother.
They know which lenders offer the best terms for your situation, and they’ll help match you with ones who regularly handle cases like yours.
Got questions about bridge loans for your situation?
We can connect you with experienced brokers who handle both open and closed bridging finance. They’ll explain your options in plain English and help find the right solution for your needs.
Frequently Asked Questions
Our loans start from £150,000, though some specialists might consider smaller amounts. Maximum loans can reach into millions.
Yes, typically 20-25% of the property value. Some lenders can offer higher loan-to-value ratios with additional security.
Read more: Do you need a deposit for a bridging loan?
Most lenders allow early repayment. Many don’t charge exit fees, but always check the terms.
Most property types including residential, commercial, and land. Even non-standard constructions might be considered.
Read more: What Properties Can A Bridging Loan Be Secured Against?
Yes, bridging loans often suit properties that traditional mortgages won’t cover. The property’s potential value after work can be taken in to consideration.
Yes, commercial bridging loans suit many business purposes including buying commercial property, managing cashflow, or funding business purchases.
The average bridging loan lasts for 12 months. Most lenders offer 24 months with others offering up to 36 months, though longer terms often mean higher rates. Regulated bridging loans are restricted to 12 months.
Read more: How Long Can You Have a Bridging Loan For?
