First-Time Buyer's Guide to Bridging Finance

Learn how bridging finance works for first-time buyers.

Our complete guide explains costs, requirements and application steps. Expert UK advice available.

Buying your first property comes with plenty of challenges, but what happens when you need to buy one quickly?

Perhaps you’ve found the perfect home at a property auction, or you’re keen to snap up a run-down property that needs work. Standard mortgages aren’t suitable for these types of opportunities, leaving many first-time buyers wondering about their options.

Enter bridging finance – a short-term lending solution that’s becoming increasingly popular among property buyers who need quick access to funds.

While bridging loans were once mainly used by property developers and investors, they’re now opening doors for first-time buyers too. Yes, they work differently from traditional mortgages, and yes, they come with higher costs – but in the right situation, they might just be the answer you’re looking for.

In this guide, we’ll walk you through everything you need to know about bridging finance as a first-time buyer. We’ll look at how these loans work, what they cost, who can get them, what the risks are, and most importantly – whether they might be right for you.

What is Bridging Finance?

Think of bridging finance as a short-term loan that helps you buy a property when a regular mortgage won’t work.

These loans are temporary and only available for short periods, anywhere from three months up to two years, giving you time to either sell another property or switch to a standard mortgage.

For first-time buyers, bridging loans work quite differently from regular mortgages.

While mortgages stretch over many years with monthly payments, bridging loans run for a shorter time with the full amount paid back when the loan ends. You’ll need a clear plan for how you’ll pay back the loan – this is what lenders call your ‘exit strategy‘.

There are two main types of bridging loans.

If you’re planning to live in the property yourself, you’ll need a regulated bridging loan. These come with extra consumer protections and usually run for up to 12 months.

If you’re buying an investment property to rent out or renovate and sell, you’ll look at unregulated bridging loans, which offer more flexibility but less protection.

You don’t have to worry about any monthly payments. Most loans are set up for you to pay everything back in one go at the end.

Read more: How Do Bridging Loans Compare‌ To Mortgages?

Why Do People Use Bridging Loans?

Bridging loans serve several specific purposes in property buying, each filling a gap where other mortgages might not work.

Let’s look at some common reasons why buyers choose this type of finance.

Breaking property chains often tops the list.

Say you’ve found your perfect home but haven’t sold your current one yet. A bridging loan could help you secure the new property while you sell the existing one, preventing you from losing out to another buyer.

Auction purchases are another key use. When you buy at auction, you’ll need to come up with all of the money and complete within 28 days – much faster than a standard mortgage can be arranged. An auction bridging loan helps you meet these tight deadlines, giving you time to arrange longer-term finance.

Properties needing work also suit bridging finance well.

Perhaps you’ve found a bargain that needs a new kitchen and bathroom before it’s mortgageable. A bridging loan lets you buy the property and fund the improvements, after which you can switch to a standard mortgage at the improved value.

Speed is often a deciding factor. If you’re up against other buyers for an under-market-value property, being able to move quickly with a bridging loan could give you the edge. Some purchases need to complete in days rather than months – bridging finance makes this possible.

Below market value (BMV) opportunities often need quick decisions. Whether it’s a motivated seller or a probate sale, these chances don’t hang around. Bridging finance helps you act fast when these opportunities arise.

Some buyers use bridging loans to break out of rental.

They might have found a property needing work that’s cheaper than local ready-to-move-in homes. By using a bridging loan to buy and renovate, they can create their ideal first home while potentially building in some equity.

Business owners sometimes use these loans too. You might spot premises perfect for your business, but they need converting from residential to commercial use. A commercial bridging loan could help you secure the property while you arrange planning permission and permanent finance.

Remember though – every bridging loan needs a clear exit strategy.

Whether you’re planning to sell, remortgage, or repay from another source, knowing how you’ll repay the loan is essential before you take one on.

The bridging lender uses your new property as collateral, or security. This is something your solicitor deals with and the loan is formally noted on the property deeds, using a legal charge.

You can use a bridging loan to purchase a property, or to raise money against one you already own. It is also possible to have a bridging loan even though there’s an existing mortgage.

Read more: How bridging finance uses legal charges.

Understanding the Costs

Before you consider a bridging loan, you’ll want a clear picture of all the costs involved. Let’s break these down into what you’ll pay at the start and during the loan.

It’s fair to say that bridging loans can be seen as expensive. But what you get in return is flexible borrowing and a fast turnaround.

Upfront Costs

Getting a bridging loan set up involves several initial fees.

You’ll pay an arrangement fee to the lender, which usually comes to 2% of your loan amount. So for a £250,000 loan, that’s £5,000.

You’ll also need a property valuation. The cost varies based on your property’s value and type – a small flat costs less to value than a large house. These fees can range from a few hundred pounds up to over £1,000 for higher-value properties.

Brokers can also charge an admin fee, or application fee, of £500-£1000.

Legal work is another upfront cost and you’ll need to pay both your solicitor and the lender’s legal team. Each property purchase is unique, but you should set aside at least £1,500 for legal fees.

Ongoing Costs

The main ongoing cost is interest. This is charged monthly on the amount owed.

There’s a few different ways of paying the interest, either monthly, or all at the end. What is available to you will depend on the lender.

Some lenders also charge exit fees when you repay the loan. These might be a fixed amount or a percentage of the loan – ask about this upfront so you’re not caught out later.

A broker can help you understand exactly what you’ll pay with different lenders, as fees and structures vary widely. They’ll also explain how different interest payment options could work for your situation.

Read more: How Do Bridging Loan Interest Options Work?

Let’s talk bridging loans!

Book your free consultation today and let’s discuss how we can help you achieve your property goals.

Who Can Get Bridging Finance?

As a first-time buyer, you might wonder if bridging lenders will even consider your application.

The good news is that yes, you can get a bridging loan as a first-time buyer. Lenders are flexible and focus more on your property and exit strategy than your buying history.

You’ll need to be at least 18 years old and either live in the UK or have a UK registered address. While some lenders prefer you to have property experience, others are happy to lend to first-time buyers if you have a solid plan for repaying the loan.

Your property choice matters more than your experience.

Lenders will want to know it’s worth enough to cover the loan – they’ll usually lend up to 75% of the property’s value. The property doesn’t need to be in perfect condition; in fact, many bridging loans are used for properties that need work before they’re mortgageable.

What about income and credit?

While these matter, they’re not always deal-breakers. Lenders will look at your income to make sure you can handle any monthly interest payments if you choose to make them. But if you’re planning to ‘roll up’ the interest and pay everything at the end, your income becomes less important.

Your credit history isn’t as critical as it would be with a standard mortgage.

Lenders look more into your exit strategy – how you’ll pay back the loan. This might be through selling the property or refinancing to a regular mortgage once you’ve done any necessary improvements.

Related reading: Can You Get a Bridging Loan Without a Job?

The Application Process

If you’ve never applied for a mortgage before then the thought of getting a bridging loan could seem overwhelming.

Hopefully, if you’ve read some of our other bridging guides you will have approached a finance broker to help you. They will be able to do much of this work and be able to guide you through the various steps.

First, you’ll need to show your broker details of the property you want to buy.

This includes the basics like the purchase price, but also things like its condition and location. If you’re planning any improvements, bring along your plans and budget – lenders like to see you’ve thought everything through.

The paperwork side includes:

  • Proof of who you are (passport or driving licence)
  • Where you live (recent utility bills)
  • Your bank statements
  • Evidence of your deposit and where it’s coming from
  • How you earn your money (payslips or accounts)

You’ll need to spell out exactly how you’ll pay back the loan.

If you’re planning to sell, provide evidence of similar property prices in the area. If you’re looking to switch to a mortgage later, you’ll want an agreement in principle from a mortgage lender.

Most bridging loans start within two to three weeks.

Here’s how it usually plays out:

  • Your broker starts by finding suitable lenders – this takes a day or two.
  • They can then arrange an agreement in principle
  • The lender then reviews everything and may ask for more details.
  • Next comes the valuation – someone visits the property to check it’s worth what you’re paying.
  • Meanwhile, solicitors handle the legal work, including property searches.

If everything goes smoothly and you have all your paperwork ready, you could have your money in about two weeks.

Working with a broker can really speed things up. They’ll make sure your application hits all the right notes first time, and they know which lenders can move quickest for your situation.

Read more: The Bridging Loan Application Process Explained

Exit Strategies Explained

Your exit strategy – how you’ll pay back your bridging loan – is one of the most important parts of your application.

Unlike a long-term mortgage, where you make monthly payments over many years, a bridging loan needs to be repaid in full at the end of the term.

Most first-time buyers choose one of two main exit strategies.

The first is refinancing – switching to a long-term mortgage once your term ends. This works well if you’re buying a property that needs work. You can use the bridging loan to buy and fix up the property, then remortgage it at its improved value.

This would work for either a property you will live in, or an investment property.

The second common strategy is selling the property.

You might choose this if you’ve bought at auction with plans to sell quickly, or if you’re doing up a property to sell on. Your lender will want to see evidence that your planned sale price is realistic based on local property values.

Other exit strategies might include using money from an inheritance, bonus, or investment that’s due to pay out. Whatever you choose, you’ll need evidence to show the lender that your plan is solid.

Remember, your exit strategy should have a backup plan too.

If you’re planning to remortgage, what happens if mortgage rates change? If you’re planning to sell, what’s your plan if the market slows down? A good broker will help you think through these scenarios and create a robust strategy.

Read more: Bridging loan exit strategies

Alternatives to Consider

Before deciding on a bridging loan, let’s look at why you might need one and what other options could work for your situation.

Common reasons for needing a bridging loan include buying at auction, purchasing an unmortgageable property that needs work, or moving quickly to secure a good deal.

But sometimes there are other ways to achieve the same goal.

Mortgages remain the most straightforward option for first-time buyers. While they take longer to arrange, they offer lower interest rates and longer repayment terms.

Family support could be another route. This might mean parents offering a loan, acting as guarantors, or using their savings as security. Some mortgage lenders offer specific family-assist products designed for this purpose.

Joint ventures (JVs) are worth considering if you’re buying a property to renovate.

Teaming up with an experienced developer or investor could give you access to their knowledge and financing contacts. They might provide the funding while you manage the project, sharing the profits when you sell.

Other options include:

Each option has its pros and cons, and what works best depends on your specific situation, timeframes, and long-term plans.

The Risks

Before you decide on a bridging loan, you need to understand what could go wrong. While these loans can be incredibly useful, they carry risks you should think about carefully.

Higher costs are the most obvious risk.

If something delays your exit plan, those monthly interest charges keep adding up. A three-month delay will cost you thousands of pounds extra. Even if you’re not paying the interest monthly, it’s still building up and will need to be paid eventually.

Your property is at risk. Like any loan secured against property, if you can’t pay back the money, the lender can take possession of your property (and then sell it). This happens much faster with bridging loans than with standard mortgages because of their short-term nature.

Market changes can potentially affect your exit strategy.

If you’re planning to sell the property, what happens if house prices drop or the market slows down? If you’re counting on a remortgage, you might find that mortgage rates have gone up or lending criteria have changed.

A lot of renovation projects take longer and cost more than planned. If you’re using a bridging loan to fund property improvements, delays or unexpected costs could eat into your budget and affect your ability to repay the loan on time.

Your backup plan needs a backup plan. Even with careful planning, things can go wrong. Perhaps your property sale falls through, or your remortgage application gets declined. You need to think through what you’ll do in these situations before taking out the loan.

The best way to handle these risks is to work with experienced professionals who can help you plan properly. It’s not possible to foresee every problem, but you do need to understand what could happen in various scenarios.

A good broker will help you think through potential problems and make sure you have solid backup plans in place.

How a Broker Can Help

For first-time buyers, a short-term bridging loan can seem like unfamiliar territory. A good broker makes all the difference by doing more than just finding you a loan.

Brokers have relationships with hundreds of lenders, including specialists who don’t deal directly with the public.

This means they can find options you wouldn’t discover on your own. They’ll match you with lenders who welcome first-time buyers and understand your particular needs.

Beyond finding the right lender, your broker will help shape your application to give it the best chance of success. They know what different lenders look for and how to present your exit strategy effectively.

Brokers also save you time and stress by:

  • Handling paperwork and chasing lenders
  • Explaining complex terms in plain English
  • Spotting potential problems before they arise
  • Keeping your application moving forward

And Finally

Bridging finance can be a useful way for first-time buyers to secure properties that wouldn’t work with standard mortgages. While these loans cost more, they offer flexibility and speed that could help you grab an opportunity that might otherwise slip away.

Before you apply, make sure you:

  • Have a solid exit strategy
  • Understand all the costs involved
  • Know exactly how you’ll pay back the loan
  • Have considered all your alternatives

If bridging finance looks right for you, your next step is speaking with a broker who can look at your specific situation and guide you through your options.

FAQ

Yes, first-time buyers can get bridging loans. In assessing risk, lenders look at the deal in front of them, rather than whether you have owned a property before.

Most lenders require 25-30% deposit, though some may ask for more depending on your circumstances and property type.

Read more: Do You Need a Deposit for a Bridging Loan?

Bridging loans are a way of borrowing money just for short periods. Typically a few months up to a year.

The money can be used for almost any reason, such as:

  • To buy a house at auction
  • Raising money for home improvements
  • Paying off other debts
  • A deposit for another property
  • Paying a tax bill

Read more: What can a bridging loan be used for?

As a first time buyer, you could use a bridging loan to initially buy a property, that otherwise would not be mortgageable.

After completing the necessary repairs, or improvements, you could then pay off the loan by remortgaging. This involves applying for a long-term mortgage and this money pays off the bridging lender.

Read more: Can You Pay Off a Bridging Loan with a Mortgage?

There’s no set minimum credit score with these loans. Lenders focus more on your exit strategy and property value than credit history.

Related reading: Can you get a bridging loan with bad credit?

Yes, bridging loans are commonly used for auction purchases where completion is needed within 28 days.

You will need to fund the auction 10% cash deposit yourself, which is payable on auction day.

Typically up to 75% of the property value, though this can vary based on circumstances.

You can use our loan to value calculator to help you work out different scenarios.

First, it’s important to remember that you will pay it back all in one go. Loan, interest, fees, everything.

There are two main ways:

  1. You sell the property, or perhaps another you own
  2. You refinance either this property, or another you may own

There are no restrictions on how you pay it back. So a windfall, inheritance, lottery win, are all acceptable. (But don’t put these in your exit strategy!).

Or it could be; sale of another asset, sale of a business or perhaps a compensation claim.

Read more: How Do You Pay Back a Short-Term Bridging Loan?

The bridging lender won’t need a survey but they will generally need a professional valuation from a surveyor.

Read more: Do You Need a Property Valuation for a Bridging Loan?

Not necessarily. Regular income is less important than with traditional mortgages, especially if you’re choosing rolled-up interest.

Read more: Can You Get a Bridging Loan Without a Job?

In fact, there are non-status bridging loans where there are no credit checks and no income checks.

Bridging loans can be as short as 3 months, though 9-12 months is more common.

Read more: How long can you have a bridging loan for?

A lot of long-term lenders won’t grant a new mortgage until you have been the owner for 6-12 months. This can cause problems if you intend on remortgaging quite soon after buying.

There are ways around this, and more flexible lenders that don’t require these waiting periods.

Read more: The 6 month mortgage rule explained

Still have more questions?

Just give us a call on 0330 030 5050 to get matched with an expert.
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