Bridging Loans for Property Development — A UK Guide

Why Developers Use Bridging Loans

Property developers use bridging loans for one reason: speed. When a site or property comes to market, the developers who can move fastest get the best deals. A bridging loan can complete in 5–14 days, compared to 6–12 weeks for traditional development finance.

Bridges are particularly useful for site acquisition — securing a property quickly before arranging longer-term development finance. They're also used for light refurbishment projects where full development finance would be overkill, and for auction purchases where you have 28 days to complete.

For smaller projects (under £500,000), a bridging loan may be all the finance you need. Buy, refurbish, and either sell or refinance — all within a single 12-month bridge.

Bridging vs Development Finance — Which Do You Need?

Bridging loans and development finance serve different purposes. A bridge is a single lump sum released upfront, typically for acquisition or light refurbishment. Development finance is released in stages (drawdowns) as the project progresses, and is designed for ground-up builds or heavy structural work.

If your project involves planning permission, structural changes, or construction over several months, you probably need development finance. If you're buying a property that needs cosmetic updating — new kitchen, bathroom, redecoration, garden — a bridge is usually simpler and faster.

Some developers use both: a bridge to acquire the site quickly, then refinance onto development finance once planning is secured. This lets you move fast on acquisition without waiting for the full development facility to be arranged.

How LTV and GDV Work for Development Bridges

For a standard bridging loan, LTV is calculated against the current market value of the property. Most lenders offer up to 70–75% LTV. So for a property worth £300,000, you could borrow up to £225,000.

Some specialist lenders also consider Gross Development Value (GDV) — the projected value of the property once work is complete. Lending against GDV typically allows a higher effective loan amount, but rates are higher and the lender will want to see a detailed schedule of works, costs, and comparable evidence for the end value.

For example, if you're buying a property for £200,000 that will be worth £350,000 after refurbishment, a lender offering 65% of GDV could lend up to £227,500 — more than the purchase price, potentially covering some refurbishment costs too.

Rates and Costs for Developer Bridges

Development bridging rates start from around 0.55% per month for straightforward residential refurbishment projects with low LTV. More complex deals — commercial conversions, higher LTV, or inexperienced developers — attract rates of 0.75% to 1.2% per month.

Arrangement fees are typically 1.5–2% of the loan amount. You should also budget for a valuation (which may need to include a reinspection on completion), legal fees, and potentially a monitoring surveyor if the lender wants to oversee the works.

Total cost for a typical 6-month developer bridge on a £200,000 loan at 0.65% per month with a 2% arrangement fee: approximately £11,800 in interest plus £4,000 in fees — around £15,800 total. Factor this into your project appraisal before committing.

What Lenders Look For

Experience matters. If you've completed similar projects before, lenders will offer better rates and higher LTV. First-time developers aren't excluded, but expect to pay more and borrow less until you have a track record.

The exit strategy is critical. For developer bridges, the exit is usually selling the completed property or refinancing onto a buy-to-let mortgage. Lenders want to see comparable sales evidence supporting your projected end value and a realistic timeline for completion.

You'll also need a clear schedule of works and costs. Even for light refurbishment, lenders want to know what you're doing, how much it costs, and how long it takes. The more detail you provide upfront, the faster the approval.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.