Bridging Loan Glossary
Key terms explained in plain English
A
Arrangement Fee
A fee charged by the lender for setting up the bridging loan. Typically 1-2% of the loan amount. Can often be added to the loan (deducted from advance) rather than paid upfront.
Adverse Credit
A borrower with a poor credit history, including CCJs, defaults, or bankruptcies. Some bridging lenders specialise in adverse credit cases, though rates will be higher.
AIP (Agreement in Principle)
A preliminary indication from a lender that they would be willing to lend, subject to full underwriting. Also called a Decision in Principle (DIP).
B
Bridging Loan
Short-term secured finance, typically 1-24 months, used to "bridge" a gap in funding. Commonly used for property purchases, auction finance, and chain breaks.
Broker
An intermediary who arranges bridging loans between borrowers and lenders. Brokers have access to multiple lenders and can find the best deal for your circumstances.
BTL (Buy-to-Let)
Property purchased to rent out to tenants. Many borrowers use bridging to purchase, then refinance to a BTL mortgage once works are complete.
C
Chain Break
Using bridging finance to complete a purchase when your property sale falls through, avoiding losing your onward purchase.
Completion
The final stage of a property transaction where ownership transfers and funds are released.
Closed Bridge
A bridging loan where the exit (repayment method) is certain and documented, such as an exchanged sale. Closed bridges typically have lower rates.
CCJ (County Court Judgment)
A court order for debt repayment. Having a CCJ affects your credit score but some bridging lenders will still lend.
D
Day 1 LTV
The loan-to-value ratio at the start of the loan, based on purchase price or current value (whichever is lower).
Drawdown
The release of loan funds. For refurbishment loans, funds may be drawn in stages as works progress.
DIP (Decision in Principle)
See AIP. A preliminary lending decision before full underwriting.
Development Exit
A bridging loan used by developers to repay development finance once a project is complete but before all units are sold.
E
Exit Fee
A fee charged when you repay the bridging loan. Can be a percentage of the loan or one month's interest. Some lenders have no exit fees.
Exit Strategy
How you plan to repay the bridging loan. Common exits include property sale or refinancing to a mortgage. A clear exit strategy gets better rates.
Equity
The value of a property minus any outstanding debt. Equity in existing properties can be used as additional security for bridging loans.
F
First Charge
The primary security on a property. If the property is sold, the first charge holder is paid first. Bridging loans are usually first charge.
FCA Regulated
A bridging loan regulated by the Financial Conduct Authority. Required when the property will be occupied by the borrower or their family.
Facility Fee
Another term for arrangement fee.
G
GDV (Gross Development Value)
The estimated value of a property after refurbishment or development works are complete. Heavy refurb loans are often based on GDV.
Gross Loan
The total loan amount including all fees added to the facility. Compare to net loan (amount actually received).
H
Heavy Refurbishment
Significant property works requiring planning permission or building regulations. Includes extensions, conversions, and structural changes.
HMO (House in Multiple Occupation)
A property rented to 3+ tenants from different households. HMOs often need bridging for purchase as they can be harder to mortgage.
I
Interest Rolled Up
Interest added to the loan balance rather than paid monthly. You pay all interest at the end when you repay the loan. Also called retained interest.
Interest Serviced
Interest paid monthly during the loan term, like a traditional mortgage. Usually results in lower total cost but requires monthly cashflow.
L
Legal Fees
Costs for legal work including the lender's solicitor and your own. Budget £2,500-5,000 total for a straightforward bridging loan.
Light Refurbishment
Cosmetic improvements not requiring planning permission. Includes new kitchens, bathrooms, decoration, and flooring.
LTV (Loan-to-Value)
The loan amount as a percentage of property value. A £300,000 loan on a £400,000 property is 75% LTV. Lower LTV = lower rates.
LTGDV (Loan-to-Gross Development Value)
For refurbishment loans, the loan as a percentage of the finished property value.
M
Minimum Term
The shortest period you must keep the loan. Usually 1-3 months. Some lenders charge interest for the minimum term even if you repay earlier.
Monthly Rate
Bridging loan interest is quoted per month, not per year. A 0.55% monthly rate equals 6.6% annually (simple interest).
N
Net Loan
The amount you actually receive after fees are deducted. If gross loan is £300,000 and fees are £9,000, net loan is £291,000.
Non-Regulated
Bridging loans for investment properties (not occupied by borrower/family). Less consumer protection but more flexibility.
O
Open Bridge
A bridging loan where the exit is not yet certain (e.g., "will sell or refinance"). Higher rates than closed bridges due to increased risk.
Open Market Value (OMV)
What a property would sell for on the open market with normal marketing. Used for valuations.
P
Personal Guarantee
A legal commitment that you will personally repay the loan if the company/borrowing structure cannot. Usually required for limited company borrowers.
Procuration Fee
Commission paid by the lender to the broker for introducing the business. Usually 1% of the loan, paid by the lender not you.
R
Regulated Bridging
FCA-regulated loans for properties to be occupied by the borrower or family. Has strict rules but more consumer protection.
Retained Interest
Interest deducted from the loan at the start and held by the lender. You receive less upfront but make no monthly payments.
Refurbishment Finance
Bridging loans that include funding for property improvements, not just purchase price.
S
Second Charge
A loan secured behind an existing first charge mortgage. Only repaid after the first charge in a sale. Higher rates than first charge.
Security
Property used as collateral for the loan. The lender can repossess if you don't repay.
Serviced Interest
Monthly interest payments during the loan term. See "Interest Serviced".
SPV (Special Purpose Vehicle)
A limited company set up specifically to own property. Often used for tax efficiency in property investment.
T
Term
The length of the bridging loan, typically 1-24 months. Shorter terms usually mean lower total cost.
Title Insurance
Insurance protecting against defects in property ownership. Can speed up completion when full searches would take too long.
True Cost
The total cost of borrowing including all interest and fees. Always compare true cost, not just headline rates.
U
Underwriting
The lender's process of assessing your application, including credit checks, valuation, and legal review.
Unregulated Bridging
Loans for investment properties, not subject to FCA consumer protection rules. More flexible but less protection.
V
Valuation
A surveyor's assessment of property value, required by the lender. Costs £500-1,500 depending on property value and complexity.
Valuation Fee
The cost of the lender's valuation survey. Usually paid upfront before the loan completes.
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