UK bridging finance comes in several distinct forms, each suited to specific property situations. Choosing the right structure affects your costs, timeline, and overall experience.
This comprehensive guide compares each type, explaining when to use open versus closed, first versus second charge, and regulated versus unregulated options. Understanding these distinctions helps you choose the most cost-effective structure, whether you need business cashflow funding or are refinancing an existing facility.
Open vs Closed Bridging Loans
The first major distinction is between open and closed facilities, determined by whether you have a fixed repayment date.
Closed Bridging Loans
Definition Closed facilities have a fixed repayment date agreed at the outset, typically when a specific event completes - such as a property sale or long-term finance arrangement.
Characteristics
- Fixed completion date specified in loan agreement
- Lower pricing due to repayment certainty
- Evidence of exit required at application stage
- Most economical bridge loan option
- Rates tailored to individual circumstances
When to Use Closed Bridging
- You've exchanged contracts on a property sale with fixed completion date
- Long-term mortgage or finance offer confirmed with specific start date
- Definite date when inheritance, business sale, or other funds will arrive
- Property purchase with simultaneous sale completing on specific date
Example Scenario You've found an investment property and need to exchange immediately, but your existing buy-to-let sale completes in 8 weeks. A closed bridge loan covers the 8-week gap with a fixed repayment date aligned to your sale completion.
Open Bridging Loans
Definition Open facilities have no fixed repayment date, offering flexibility when your exit timing is uncertain.
Characteristics
- No fixed repayment date (though maximum term applies, typically 12-24 months)
- Pricing reflects flexibility with individual assessment
- Exit strategy required but without specific date
- Early repayment available any time without penalty
- Request your personalized quote
When to Use Open Bridging
- Property listed for sale but no buyer yet secured
- Awaiting planning permission with uncertain timeframe
- Developing property with variable completion timing
- Exit strategy clear but timing uncertain
- Need flexibility to repay when convenient
Example Scenario You're purchasing a property at auction that requires substantial refurbishment before selling. You know you'll sell within 12 months, but the exact sale date depends on refurbishment progress and market conditions. An open bridge loan provides the required flexibility. If you're looking to unlock equity from existing property for business purposes, see our guide to equity release bridging.
First Charge vs Second Charge Bridging
Another crucial distinction relates to the position of the loan against your property - whether it's the primary security or sits behind existing lending.
First Charge Bridging Loans
Definition First charge facilities are the primary charge against the property, meaning the lender has first claim if the property is sold.
Characteristics
- Primary charge position on property title
- Competitive rates due to first charge security
- Higher maximum LTV available (up to 75%)
- Simpler legal process
- Most common type of short-term property finance
When to Use First Charge
- Purchasing property with no existing mortgage
- Refinancing and replacing existing charge with a new facility
- Property owned outright being used as security
- Lender requires first charge position
Example Scenario You own a property outright (no mortgage) and want to purchase an investment property at auction. A first charge bridge loan secured against your owned property provides the required funding in first position.
Second Charge Bridging Loans
Definition Second charge facilities sit behind an existing first charge (usually a mortgage), giving the lender second claim on the property if sold.
Characteristics
- Secondary position behind existing charge
- Pricing reflects additional lender risk with individual assessment
- Lower maximum LTV (usually 50-65% combined LTV)
- Additional legal complexity
- First charge lender consent often required
When to Use Second Charge
- You need additional funding but want to keep existing mortgage
- Existing mortgage has excellent rate you don't want to lose
- First charge lender won't agree to a new facility replacing their charge
- Combined borrowing needed exceeds single lender's first charge limits
Example Scenario You have a buy-to-let mortgage with £200,000 outstanding on an investment property worth £500,000. You need £100,000 to purchase a development opportunity. A second charge bridge loan for £100,000 sits behind your existing £200,000 mortgage (60% combined LTV), allowing you to keep your competitive existing rate.
Regulated vs Unregulated Bridging Loans
Mallard Bridging does not offer regulated bridging loans. We provide business and investment finance only. The following section is included for educational purposes so borrowers understand the distinction. If you require a regulated facility for an owner-occupied property, you will need an FCA-authorised lender.
These facilities are either regulated by the Financial Conduct Authority (FCA) or unregulated, depending on the property's intended use.
Regulated Bridging Loans
Definition Regulated facilities are FCA-regulated when the property will be the borrower's main residence or that of a close family member. Mallard Bridging does not offer regulated bridging loans.
FCA Regulation Applies When
- The borrower or a family member will live in the property as their main home
- Property is the borrower's primary residence
- The borrower is purchasing a property to live in permanently
Additional Protections
- FCA conduct rules apply
- Detailed affordability assessments required
- Stricter lending criteria
- Additional regulatory requirements for the lender
- Clear disclosure requirements
- Complaints can be escalated to Financial Ombudsman Service
Characteristics
- More thorough application process
- Extended arrangement time
- Often higher fees due to regulatory requirements
- More paperwork and disclosure
When It Applies Any property-backed facility where the borrower or an immediate family member will occupy the property as a primary residence triggers FCA regulation.
Note: Mallard Bridging provides business and investment finance only. The regulated bridging scenarios described above are provided for educational context — we do not offer regulated bridging loans or finance for owner-occupied residential properties.
Unregulated Bridging Loans
Definition Unregulated facilities fall outside FCA regulation when used for investment, business, or second home purposes.
Common Unregulated Scenarios
- Buy-to-let property purchases
- Property development and refurbishment projects
- Commercial property acquisitions
- Holiday homes or second residences
- Property portfolio expansion
- Business premises
Characteristics
- Faster application and approval process
- More flexible lending criteria
- Decision based on property value and exit strategy
- Less paperwork required
- No formal affordability assessment
- Not covered by FCA regulation or Financial Ombudsman Service
Responsible Lending Even though unregulated, reputable lenders follow responsible lending practices, ensuring borrowers have viable exit strategies and understand the risks.
Specialist Bridging Loan Types
Beyond the main categories, several specialist types serve specific purposes.
Development Exit Finance
Purpose Covers the gap between completing a development and securing a buy-to-let mortgage or selling the property.
Characteristics
- Secured against recently completed development
- Allows time to market property effectively
- Can cover holding costs during sale period
- Often follows a development finance facility
For a comprehensive guide to bridging for property development, see our development finance guide.
Auction Finance
Purpose Specifically designed for property auction purchases requiring completion within 28 days.
Characteristics
- Rapid approval (same business day in many cases, subject to documentation)
- Finance arranged ahead of auction day
- Legal work expedited to meet completion deadline
- Often proceeds to longer-term property finance or development funding
Buy-to-Let Bridging
Purpose Enables the purchase of buy-to-let properties before transitioning to standard buy-to-let mortgages.
Common Uses
- Property requires refurbishment before BTL mortgage available
- Rental income not yet established to prove for mortgage
- Tenant in place preventing mortgage valuation
- Quick purchase before refinancing
Refurbishment Bridging
Purpose Covers both property purchase and refurbishment costs before refinancing based on improved value.
Characteristics
- Single facility covering purchase and works
- May release refurbishment funds in stages
- Exit onto standard mortgage based on post-work value
- Developer experience may be required
Read our full guide to refurbishment finance for detailed coverage of light and heavy renovation projects.
Chain Break Bridging
Purpose Provides funds to complete a property purchase when a linked sale falls through or is delayed, removing the dependency between selling one investment and buying another.
Common Uses
- Investment portfolio restructuring where sale and purchase timelines don't align
- Securing a time-sensitive acquisition while an existing property sale completes
- Auction purchases funded ahead of an in-progress sale
For detailed guidance on this specialist facility, see our chain break bridging loans guide.
Portfolio Bridging
Purpose Secured against multiple properties to achieve higher loan amounts or better LTV.
Characteristics
- Multiple properties provide cross-collateralization
- Enables larger loan amounts
- Can mix residential and commercial security
- More complex legal work but higher flexibility
Ready to Find the Right Bridging Structure?
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Choosing the Right Bridging Loan Type
Decision Framework
1. Repayment Date Certainty
- Fixed date: Closed bridging (lower rates)
- Flexible timing: Open bridging (more flexibility)
2. Existing Charges
- No mortgage: First charge bridging (lower rates)
- Existing mortgage: Second charge bridging or refinance
3. Property Use
- Owner-occupied: Regulated lending (more protections)
- Investment/business: Unregulated lending (faster, more flexible)
4. Specific Purpose
- Auction: Auction finance (fast turnaround)
- Refurbishment: Refurbishment bridging (includes works costs)
- Development exit: Development exit finance (post-completion holding)
- Portfolio: Portfolio bridging (multiple securities)
Cost Considerations
Lowest Costs
- Closed facilities
- First charge position
- Unregulated scenarios
- Standard property types
- Lower LTV (50-60%)
Higher Costs
- Open facilities
- Second charge position
- Regulated scenarios
- Complex properties
- Higher LTV (70%+)
Try our free calculator to see indicative repayment figures for your loan amount and duration, helping you compare costs across different facility types. For a detailed breakdown of what you'll pay, read our guide to bridging loan costs and fees.
Typical Terms and Conditions
Loan Terms
- Duration: 1-24 months (most 6-12 months)
- Amount: £25,250 - £8,000,000+
- LTV: 60-75% typical (higher on individual assessment)
Interest Structure
- Rolled up: Interest accrues monthly and is added to the loan balance, repaid in full at exit
- No monthly payments during the loan term
- Early repayment: Usually no penalties after first month
Application Requirements by Type
All Types
- Property details and valuation
- Exit strategy evidence
- Proof of deposit/equity
- Identity verification
- Credit search consent
Additional for Regulated
- Detailed income and expenditure
- Formal affordability assessment
- Additional disclosure documents
- Extended advice and information period
Additional for Second Charge
- First charge lender details
- Outstanding mortgage balance
- First charge lender consent (often)
- More detailed legal searches
Additional for Development/Refurbishment
- Project plans and specifications
- Professional team details
- Build cost estimates
- Project timeline and milestones
Common Mistakes to Avoid
Choosing Open When Closed Available Open facilities cost more. If you have a fixed repayment date, a closed bridge loan provides better rates.
Not Declaring Main Residence Use If a borrower plans to occupy the property as their primary residence, the facility must be regulated under FCA rules. An unregulated loan applied to a regulated situation can invalidate the facility. Mallard Bridging does not offer regulated bridging loans — if the property will be owner-occupied, an FCA-authorised lender is required.
Underestimating Combined LTV Second charge applications sometimes overlook that combined LTV includes first and second charges together.
Ignoring First Charge Consent Some first charge lenders prohibit or restrict second charges. Check before applying.
Assuming Regulation Means Better Regulation provides protections but also adds time and cost. For investment purposes, unregulated may be more appropriate.
How Mallard Bridging Can Help
We provide all types of short-term property finance from £25,250 to £8,000,000:
- Open and closed bridging options
- First and second charge facilities
- Unregulated business and investment lending
- Specialist options for development, auction, and refurbishment
- Same-day decisions on most applications
- Rapid funding — as fast as 24 hours for repeat clients, 48 hours for prepared new borrowers (subject to valuation, documentation, and legal process)
Our specialists assess your situation and identify the most economical structure for your specific needs.
Frequently Asked Questions
What is the difference between open and closed bridging loans? A closed bridge loan has a fixed repayment date — you know exactly when you'll repay. An open bridge loan has no fixed date, giving flexibility when your exit timing is uncertain. Closed facilities typically attract more favourable terms.
Should I choose first charge or second charge? First charge is the most common and usually offers better pricing. Choose second charge when you want to keep an existing mortgage with favourable terms and access additional capital without refinancing. See our second charge guide for more.
What is a regulated bridging loan? A regulated facility is FCA-regulated and applies when the property will be the borrower's main residence or that of a close family member. These loans must be provided by an FCA-authorised lender with specific consumer protections in place. Mallard Bridging does not offer regulated bridging loans — we provide business and investment finance only. If you need a regulated facility, you will need to approach an FCA-authorised lender.
How do I know which type is right for my situation? The right type depends on your exit strategy, timeline, and existing charges on the property. Use our free calculator to get indicative figures, or speak to a specialist to discuss your specific situation.