Bridging Loans: Real Cost Comparison and Worked Examples (2026)

Why bridging loans exist

A bridging loan is short-term finance secured against property, designed to "bridge" a gap — most commonly between buying a new property and selling an existing one, completing an auction purchase within a tight deadline, or funding urgent renovation work before refinancing onto a standard mortgage. Speed and flexibility are the main selling points; cost is the main trade-off.

Worked example 1: A chain-break bridging loan

Helen has exchanged contracts to buy a new house for £450,000 but her own sale has fallen through at the last minute. She takes a closed bridging loan for £450,000 for 4 months while she quickly resells her current home.

• Monthly interest rate: 0.75%
• Interest for 4 months (rolled up): £450,000 × 0.75% × 4 = £13,500
• Arrangement fee (1.5%): £6,750
• Legal and valuation fees: approximately £2,500
• Exit fee (1%): £4,500
• Total cost of the bridge: approximately £27,250

While expensive, this cost may be worthwhile to Helen if it prevents her losing the new property and having to restart her search, or losing a non-refundable deposit already paid.

Worked example 2: Auction purchase bridging finance

Marcus buys a run-down terraced house at auction for £160,000, needing to complete within the standard 28-day deadline — far too fast for a conventional mortgage. He takes an open bridging loan for £120,000 (75% loan-to-value) for an estimated 6 months while he renovates and then refinances.

• Monthly interest rate: 1.0% (open bridge, slightly higher rate due to no fixed exit date)
• Interest for 6 months: £120,000 × 1.0% × 6 = £7,200
• Arrangement fee (2%): £2,400
• Legal/valuation fees: £1,800
• Total bridging cost: approximately £11,400

After renovation, Marcus refinances onto a standard buy-to-let mortgage based on the improved value of the property, repaying the bridging loan in full from the new mortgage advance.

Worked example 3: Bridging vs waiting to sell first

Compare Helen's situation (worked example 1) against the alternative of simply waiting to find a new buyer before proceeding with her purchase.

If the property Helen is buying is genuinely below market value, or she would lose a substantial exchanged deposit by pulling out, the £27,250 bridging cost can be the cheaper option once the risk of losing the purchase entirely is properly accounted for.

Comparing bridging loan types

Is a bridging loan right for your situation?

Bridging finance makes sense when speed is essential and you have a credible, realistic exit strategy — but it should never be used as a long-term substitute for a proper mortgage. Once your situation stabilises, use a Mortgage Calculator to compare the cost of refinancing onto a standard product, and a Remortgage Calculator if you already have a mortgage elsewhere and are considering releasing equity to repay a bridge.

Practical steps before taking a bridging loan

1. Confirm your exit strategy in writing — sale, remortgage, or another source of funds — before applying.
2. Get quotes from at least 2-3 specialist bridging lenders or a broker, since rates and fees vary significantly.
3. Read the small print on exit fees and early repayment, since some bridging loans charge no exit fee at all.
4. Model the total cost, not just the monthly rate, including arrangement, legal and exit fees.
5. Never take a bridging loan without a credible plan to repay it — the security is your property.

Sources

• Financial Conduct Authority: Bridging loans guidance
• gov.uk: Buying at auction — completion timescales
• Money Helper: Bridging loans explained