Residential development bridging finance

Lending criteria and what funders look for

A residential development bridging loan is judged more flexibly than development finance on the scheme itself, because the loan is short term and security-led, but lenders are strict on the exit. A bridge can be advanced on a site without planning consent, where a development lender cannot yet lend, provided there is a clear charge over a saleable, financeable site and a credible repayment route within the term. That route is usually a refinance onto development finance once consent is in place, or a sale of the consented site. The lender will check the borrower's experience, the planning prospects and the logic of the deal, and will size the loan to value against the site value, lending more keenly where consent is already in place and more cautiously on a site bought on hope of consent. Demand context supports the case for assembling sites: the ONS projects average annual household formation in England of around 242,000 households over 2022 to 2032, against net additional dwellings of around 208,600 in 2024/25 per MHCLG, below the 300,000 target, which keeps pressure on land that can deliver rental homes. We make sure the exit onto development finance is real and arranged before the bridge draws, so you are never left holding a bridging loan with no way out.

How much you can borrow

Bridging lenders advance up to around 65 to 75 percent loan to value of the site value, with the figure set by the valuation basis, the planning position and the quality of the exit. A site with planning consent supports more debt than a site bought on hope of consent, because the exit onto development finance is clearer and the value more certain. Because the loan is short term and interest can be retained or rolled up, the net amount you receive at completion is the gross loan less retained interest and fees, so it pays to size the facility against what you actually need rather than the maximum available. Where the plan is to assemble several titles, the bridge can be structured to fund the acquisitions in tranches as titles are secured, building toward a single developable site that then refinances onto development finance. We model the loan to value, the retained interest and the day-one net advance up front, so there are no surprises at completion and the bridge is no larger, and no dearer, than the deal requires. We size it against the exit, because a bridge that runs only as long as it takes to secure consent and move onto development finance is a cheap, fast tool.

Rates and costs

Bridging is priced per month, indicatively around 0.75 to 1.10 percent, because it is short-term, fast and flexible, so it is dearer than development finance and should be used only for as long as you need it. Interest is usually retained or rolled up rather than paid monthly, so it does not strain cashflow during the term. Expect a lender arrangement fee of around 1 to 2 percent, a valuation fee, legal costs for both sides, and sometimes an exit fee. The single biggest cost lever is time: a bridge held for three months costs a fraction of one held for eighteen, so lining up the exit onto development finance early matters. Where a site is held through planning, the timetable is partly outside the developer's control, so we build a realistic term and a contingency into the bridge rather than assuming consent on the earliest possible date. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim an exclusive tie to any lender.

Bridging, development finance or a development exit

Residential development bridging finance is the right product when you need to secure a site faster than a development lender can move, or when the site cannot yet be funded on development finance because it has no planning consent. It is short-term money and is always meant to be repaid by something cheaper: development finance once consent is in place, or a sale of the consented site. If the site already has consent and you have time, development finance is the right first port of call to fund the build. A development exit facility is a different tool again, used at the other end of a scheme, after practical completion, to repay development finance while the built scheme leases up. The classic build-to-rent sequence is to bridge to secure and assemble the site, refinance onto development finance to build, then onto a development exit and investment finance once the scheme is built and let. The discipline that makes bridging work is planning the exit before the bridge draws, so we line up the development finance at the outset and the bridge does its job and steps aside.