Buy-to-let property investment requires quick decisions and ready access to funds.
While standard mortgages work for straightforward purchases, many property deals require faster, more flexible solutions. Bridging finance fills this gap, offering landlords a way to act quickly, securing deals with fast finance.
When Landlords Need Quick Finance
Most buy-to-let mortgages take 6-8 weeks to complete, they are not suitable for many time sensitive opportunities.
Auction purchases, properties that need work or competitive market situations often require much faster access to funds. Bridging loans are funded in days or weeks, allowing landlords to snap up profitable deals while others wait for mortgage approval.
Common Uses in Property Investment
Auction Property Purchases
Property auctions offer landlords the chance to buy properties at competitive prices but they come with strict completion requirements. Winning bidders have 28 days to complete their purchase or lose the property and their deposit.
Standard mortgages rarely meet this deadline, so auction bridging finance is essential for auction purchases.
Preparing for auction purchases requires planning. Successful landlords arrange their bridging finance before auction day, starting with an independent valuation of the target property.
They do preliminary legal checks on title and planning issues, have their deposit funds ready, and have an agreement in principle from their chosen bridging lender.
Property Refurbishment Projects
Many rental properties need work before letting and current regulations make this even more important.
Rental properties must meet minimum energy efficiency standards – an EPC rating of E or above, with this eventually rising to a C. Bridging finance allows landlords to buy and improve properties that don’t yet meet these standards.
Property improvements fall into two categories.
Light refurbishment
Light refurbishment covers the basics of property modernisation, including updating kitchens and bathrooms, general decoration, basic repairs, window replacements and energy efficiency improvements. These projects take a few weeks to complete and don’t require planning permission or structural changes.
Heavy refurbishment
More extensive heavy refurbishment works involve significant structural changes or major property improvements. These might include building extensions, converting lofts into additional bedrooms, reconfiguring internal layouts or full electrical and plumbing system updates. These projects require careful planning and often need various permissions and certificates.
Portfolio Expansion
Professional landlords have multiple properties and use bridging finance strategically to grow their portfolio.
Portfolio landlords love the flexibility of bridging finance.
They can buy multiple properties at once when opportunities arise, often getting better deals through bulk purchases. You can have more than one bridging loan, giving you flexibility to take on a new project before others are finalised.
Many use bridging loans to release equity from existing properties to fund refurbishment projects or buy below market value deals. This also helps break property chains so they can grow their portfolio even when traditional mortgage timing is an issue.
For many property investors, using a bridging loan to initially buy a property is the default option. They know that it is quick and fuss-free. They can agree a price and get moving on the legal work within a matter of days.
Get access to expert brokers and specialist bridging lenders
Understanding Bridging Finance
Bridging loans lend up to 80% of the property’s value and the lending criteria is quite different to normal mortgages.
Buy-to-let mortgage lenders focus heavily on rental income projections and require borrowers to have a minimum earned income.
Bridging lenders look at property value, condition and the exit strategy. They also consider the project timeline and the borrower’s experience in similar projects.
The cost structure of bridging finance reflects its specialist nature.
Monthly interest rates are higher than other mortgages as it’s a higher risk and shorter term. Arrangement fees are usually 2% of the loan amount. Additional costs are valuation fees for the property assessment and legal fees for the borrower and lender.
Some lenders charge exit fees but many now offer exit fee free products to remain competitive.
The main benefits are speed and simplicity. There’s no need for payslips or references, and lenders know they must work fast to get the loan approved and ready for draw down.
Planning Your Exit
Success with bridging finance depends on having a clear and viable exit strategy. This is your plan for repaying the loan, along with fees and interest.
Most landlords will refinance onto a buy-to-let mortgage once they’ve completed the property works and established the rental income. Others plan to sell the property after adding value through refurbishment.
Either way, lenders need to see that the proposed exit will work within the loan term.
Exit planning must take into account several factors.
The timeline needs to allow for potential delays in the building works or the refinancing process. Market conditions can affect property values or rental demand. Refinancing criteria can change during the bridging term.
Experienced landlords will have multiple exit options, maybe including selling to their own property company or using proceeds from other investment sales.
One aspect to bear in mind is trying to refinance within six months of purchase.
Lots of lenders work to a ‘six month mortgage rule‘, whereby properties have to be owned for at least six months before they grant approval for a new mortgage.
Expert brokers will know how to get around this inconvenience, as not all lenders take the same strict stance on ownership. Day one mortgages can be used to remortgage, at any point from completion.
Read more: Who needs a day one remortgage?
Risk and Management
Bridging finance brings opportunities and risks that need to be managed.
Project delays can extend the loan repayment term and increase interest costs. Renovation projects can hit unexpected problems and cost overruns. Market changes during the loan term can affect property values or rental demand.
Changes in lending criteria can affect onward refinancing options.
Successful landlords manage these risks by being prepared.
They have detailed project plans with realistic timelines and contingency time for unexpected delays. Renovation budgets have a safety margin for extra costs. Regular project reviews help identify potential problems early so corrective action can be taken.
Many have relationships with multiple lenders and brokers so alternative refinancing options are available.
Related reading: Can You Extend a Bridging Loan?
Application Process
The application process starts with an initial agreement in principle. Your broker will approach the lender and explain the situation and what you want to achieve.
Once approved it’s time to gather all of the property information including current value and projected post works value. Borrowers need to provide standard ID and proof of address plus detailed exit strategy documentation.
Project timelines and cost breakdowns help the lender to assess the loan viability.
Specialist brokers are a valuable part of the application process. Their market knowledge helps to identify the right lenders for the project and often get exclusive rates that are not available to direct applicants.
Brokers know the individual lenders preferences and criteria and can structure the application for the highest chance of success. They also manage the application process, deal with queries and make sure deadlines are met.
Legal
Solicitors are an essential part of the bridging finance process.
Their work starts with property searches, and identifying any legal restrictions on its use. Title searches ensure clean ownership transfer and planning permission checks confirm the proposed works are viable. The legal team also handle the completion process to ensure all regulatory requirements are met.
Current UK property laws affect bridging finance projects. Energy efficiency requirements are changing and affect both immediate renovation and future letting potential. HMO licensing rules vary by local authority so need to be checked for conversion projects. Building regulations change and affect renovation specs especially for projects that involve structural works.
In terms of legal fees, you are required to pay for the lenders legal fees, in addition to your own.
Further reading: Do I Need a Solicitor for a Bridging Loan?
Valuation
All lenders will need to understand the property’s current and potential value.
For very simple cases they will often accept an AVM valuation. AVM stands for Automated Valuation Model, which is essentially a computer generated estimated value, based on local data and predictions.
These are fast and much cheaper than a normal valuation.
Moving on from AVM’s would be desktop valuations and physical valuations. What is on offer will depend on your lender.
When looking at refurb projects, the scope for value addition varies greatly between properties.
Some properties have obvious potential through basic modernisation and others need more creative approach to improvement. Understanding local market preferences helps to target the renovations. Experienced landlords have relationships with local estate agents and get valuable insight into area specific opportunities and challenges.
Related: A Guide To Property Surveys
Next Steps
Bridging finance is more expensive than other secured loans but its speed and flexibility makes it worth it for the right projects.
Landlords use this funding option strategically and match it to the right opportunities. Knowing the benefits and responsibilities will ensure success.
Please call us on 0330 030 5050 to get matched with a bridging loan broker.
Frequently Asked Questions
Most bridging loans complete within 5-10 days, with some lenders able to provide funds in as little as 72 hours for urgent cases. The exact timeline depends on property type, documentation readiness, and legal requirements.
Read more: How quickly can you get a bridging loan?
Typically, you’ll need 20-25% of the property’s value as a deposit. Some lenders offer up to 75-80% LTV, though higher LTV rates often mean higher interest charges.
Read more: Do you need a deposit for a bridging loan?
Yes, bridging lenders focus primarily on the property’s value and your exit strategy rather than credit history. However, adverse credit might affect interest rates and terms offered.
Read more: Can you get a bridging loan with bad credit?
Interest can be rolled up (added to the loan and paid at the end), serviced monthly, or retained (deducted from the loan advance). The choice is decided by the lender and affects both monthly costs and total loan amount.
Loans typically range from £150,000 to £25 million. The amount depends on property value, exit strategy strength, and overall deal viability.
Loans secured against your home are regulated by the FCA. Investment property bridging loans are typically unregulated but follow industry standards.
Read more: Are bridging loans regulated by the FCA?
