Comparison · Property Finance · 2026/27
Bridging Loan vs Development Finance UK 2026/27
A bridging loan is fast, short-term gap funding released as a lump sum. Development finance funds a construction project in staged drawdowns tied to build progress. This 2026/27 guide compares rates, LTV and which suits which project.
Key facts -- 2026/27
- • Typical bridging term: weeks up to 12-24 months
- • Typical bridging rate: ~0.5-1.5%/month
- • Bridging LTV: up to ~70-75%
- • Development finance LTV/GDV cap: ~60-70% of projected GDV
- • Development finance drawdowns: staged, surveyor-verified
- • Planning permission: generally required for development finance, not bridging
Release Structure and Purpose
A bridging loan is designed for speed and a single, well-defined gap -- funds are released as one lump sum, and the loan is repaid via a clear, near-term exit such as a sale completing or a refinance.
Development finance is designed for a longer, staged process -- funds are released incrementally as construction milestones are verified, reducing the lender's exposure to an unfinished project and aligning funding with actual build progress.
Worked Example: Two Different Scenarios
| Scenario | Suitable finance |
|---|---|
| Chain break, need to complete a purchase before your sale finishes | Bridging loan |
| Ground-up new build of 6 residential units | Development finance |
Illustrative only -- consult a specialist broker for project-specific terms. Use the mortgage calculator to compare against standard mortgage finance where relevant.
Side-by-Side Comparison
| Factor | Bridging loan | Development finance |
|---|---|---|
| Speed to arrange | Fast, days to weeks | Slower, more due diligence |
| Fund release | Lump sum | Staged drawdowns |
| Planning permission needed | No | Generally yes |
| Typical use | Chain break, auction, quick purchase | New build, major conversion |
| Regulation | FCA-regulated if on main residence | Typically unregulated |
Frequently Asked Questions
Frequently Asked Questions
What is a bridging loan used for?
Short-term finance (weeks to 12-24 months) to bridge a funding gap -- chain breaks, auction purchases, or unmortgageable properties pending refinance or sale.
What is development finance used for?
Funds construction or major renovation, released in stages as the build progresses, tied to a schedule of works and surveyor sign-off.
How do interest rates compare?
Both cost more than standard mortgages. Bridging is often quoted monthly (~0.5-1.5%/month, ~6-18% annualised). Development finance varies by project risk, often with arrangement and exit fees.
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How is each released?
Bridging is usually a single lump sum at completion. Development finance is released in staged drawdowns tied to construction milestones.
What LTV can I typically borrow?
Bridging: up to ~70-75% of current value. Development finance: up to ~65-70% of land cost plus up to 100% of build costs, capped relative to projected GDV (~60-70%).
Do I need planning permission for development finance?
Generally yes -- lenders require it (or near-certainty) before funding, since project value depends on what has been approved. Bridging loans do not require it.
Can a bridging loan fund a small renovation?
Yes -- a light refurbishment bridge can suit lighter work, while development finance suits larger builds or heavy structural conversions requiring staged monitoring.
What exit strategy is required?
Both require a credible repayment plan -- typically sale, refinance to a standard/buy-to-let mortgage, or proceeds from another property sale.
Are these FCA regulated?
Bridging loans secured against a main residence are typically regulated. Investment/commercial loans, including most development finance, are typically unregulated.
Which is faster to arrange?
Bridging loans, sometimes within 1-2 weeks. Development finance takes longer given additional due diligence on build costs, planning and GDV.
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Disclaimer: This comparison is general educational information based on typical 2026/27 UK property finance products. It is not financial advice. Rates, LTVs and fees vary significantly by lender and project. Consult a specialist broker before proceeding.