Bridging Finance vs Commercial Mortgage: Which Do You Need

Understanding the Two Main Routes to Commercial Property Finance

**Bridging finance** and **commercial mortgages** are the two most common funding routes for commercial property transactions in the UK. While both are secured against property, they serve fundamentally different purposes and suit different circumstances.

Choosing the wrong product can cost thousands in unnecessary fees, or worse, cause you to miss a time-sensitive opportunity entirely. This guide breaks down both options so you can make an informed decision.

What Is Bridging Finance?

Bridging finance **provides** short-term secured lending, typically for 1 to 24 months. It is designed for speed and flexibility, enabling borrowers to act quickly when traditional lending timelines are too slow.

A **commercial bridging loan** is secured against commercial, semi-commercial, or residential property and is primarily used when:

• You need to complete a purchase within days or weeks
• The property does not meet standard lending criteria in its current condition
• You are acquiring at auction with a 28-day completion deadline
• You need to break a chain or secure an opportunity before it disappears

Bridging lenders prioritise the **exit strategy** — how you will repay the loan — over long-term affordability. This makes bridging accessible even when conventional lending is not available.

For more detail, see our full guide to [bridging finance](/services/commercial-bridging).

What Is a Commercial Mortgage?

A **commercial mortgage** is a long-term secured loan, typically running for 3 to 25 years, used to purchase or refinance commercial property. Monthly repayments are made throughout the term, much like a residential mortgage.

Commercial mortgages suit borrowers who:

• Are purchasing a property for long-term occupation or investment
• Have time to go through a thorough underwriting process
• Want predictable monthly payments over an extended period
• Need the lowest possible overall cost of borrowing

Lenders assess **affordability**, **business trading performance**, and **rental income** alongside property value. The underwriting process is more detailed than bridging, which is why it takes longer.

Learn more about [commercial mortgages](/services/commercial-mortgages) and how they work.

Head-to-Head Comparison

Here is a direct comparison of the two products across key criteria:

Speed of Completion

• Bridging finance: 3 to 14 days from application to drawdown. Some lenders can complete in 48 hours for straightforward cases.
• Commercial mortgage: 4 to 12 weeks is typical. Complex cases involving trading businesses can take longer.

**Key Takeaway:** If your transaction has a tight deadline, bridging finance is almost always the faster route.

Interest Rates

• Bridging finance: 0.45% to 1.5% per month (approximately 5.4% to 18% per annum). Rates are higher because the loan is short-term and the lender takes on more risk.
• Commercial mortgage: 2% to 8% per annum depending on the lender, LTV, property type, and borrower profile.

While bridging rates appear expensive, the total interest cost over a 6-month bridge can be less than the cost of losing a deal or paying a higher purchase price due to delayed completion.

Loan Term

• Bridging finance: 1 to 24 months
• Commercial mortgage: 3 to 25 years

Loan-to-Value (LTV)

• Bridging finance: Up to 75% LTV as standard, with some specialist lenders offering up to 80% with additional security
• Commercial mortgage: Up to 75% LTV is standard, though owner-occupier mortgages can sometimes reach 80%

Fees and Costs

• Bridging finance: Arrangement fee of 1% to 2%, valuation fee, legal fees, and potentially an exit fee of 1%
• Commercial mortgage: Arrangement fee of 0.5% to 2%, valuation fee, legal fees, and potentially early repayment charges if you refinance before the end of a fixed-rate period

Repayment Structure

• Bridging finance: Interest can be retained (deducted upfront), rolled up (added monthly to the loan), or paid monthly. The capital is repaid in full at the end of the term.
• Commercial mortgage: Monthly repayments of capital and interest throughout the term. Some lenders offer interest-only periods.

Underwriting Criteria

• Bridging finance: Primarily focused on the property value, the borrower's equity, and the exit strategy. Less emphasis on income, trading history, or credit score (though these still matter).
• Commercial mortgage: Thorough assessment of business accounts, rental income projections, personal credit history, and the borrower's experience.

When Bridging Finance Is the Right Choice

Bridging finance **enables** rapid property acquisition in scenarios where speed is the primary concern. Consider bridging when:

• Auction purchases: You have 28 days (sometimes 56) to complete. A commercial mortgage cannot be arranged in this timeframe.
• Chain breaks: Your sale has not completed but you need to proceed with your purchase. A bridge covers the gap.
• Uninhabitable or non-standard properties: Properties requiring significant work often do not qualify for commercial mortgages until they are improved.
• Time-limited opportunities: A vendor demands fast completion, or a below-market-value deal will not wait.
• Planning or change-of-use situations: You need to acquire now and apply for planning permission or change of use before refinancing.

Use our [bridging finance calculator](/calculators/bridging) to estimate costs for your scenario.

When a Commercial Mortgage Is the Right Choice

A commercial mortgage **delivers** the lowest long-term cost of borrowing. Choose this route when:

• Long-term investment: You plan to hold the property for years, either as an owner-occupier or landlord.
• No time pressure: The transaction can accommodate a 6 to 12 week process without risk.
• Stable income: Your business or rental income comfortably covers monthly repayments.
• The property meets standard criteria: It is in reasonable condition, has a clear use, and is valued appropriately.
• You want payment certainty: Fixed-rate commercial mortgages provide predictable monthly costs for budgeting.

The Bridge-to-Term Strategy

Many experienced property investors use a **bridge-to-term** approach. This combines both products:

1. Acquire the property quickly using bridging finance
2. Improve the property through refurbishment, conversion, or securing planning permission
3. Refinance onto a long-term commercial mortgage once the property meets standard criteria

This strategy is particularly effective because:

• You secure the deal without losing it to a faster buyer
• The property's improved value means you can borrow more on the commercial mortgage
• The higher post-works valuation reduces your effective LTV
• You benefit from low long-term rates after the initial bridge period

For a detailed look at this approach, read our guide on the [bridge to let strategy](/knowledge-hub/commercial-bridge-to-let-strategy).

**Key Takeaway:** The bridge-to-term strategy lets you capture time-sensitive opportunities while still benefiting from long-term mortgage rates. It is one of the most effective funding approaches in commercial property.

Cost Comparison: A Worked Example

Consider a £500,000 commercial property purchase.

Scenario A: Bridging Finance for 6 Months Then Refinance

• Bridging loan: £375,000 at 75% LTV
• Monthly rate: 0.75%
• Arrangement fee: 2% = £7,500
• Interest over 6 months: £375,000 x 0.75% x 6 = £16,875
• Total bridging cost: £24,375
• Then refinance to a commercial mortgage at 5% per annum

Scenario B: Commercial Mortgage From Day One

• Loan: £375,000 at 75% LTV
• Annual rate: 5%
• Arrangement fee: 1% = £3,750
• Monthly payment: Approximately £2,189 (capital and interest over 20 years)

Scenario B is cheaper overall if you have the time. But if the vendor will not wait 8 weeks, or the property needs work before it qualifies for a mortgage, Scenario A may be your only realistic option.

How a Broker Adds Value

Navigating the choice between bridging and commercial mortgage lending is where an experienced broker **provides** significant value:

• Market access: Brokers work with dozens of lenders across both bridging and term markets
• Product matching: The right product for your circumstances may not be obvious
• Rate negotiation: Established broker relationships often secure better terms than going direct
• Structuring advice: A broker can identify when a bridge-to-term approach saves money versus waiting for a mortgage
• Speed: Brokers know which lenders can move quickly and which cannot

At Commercial Mortgages Broker, we arrange both bridging finance and commercial mortgages, giving us an unbiased view of which product genuinely suits your situation. [Get in touch](/contact) to discuss your requirements.

Common Mistakes to Avoid

• Using a bridge when you have time: If there is no urgency, a commercial mortgage will almost always be cheaper
• Choosing a mortgage when speed matters: Losing a deal because your mortgage took too long is far more expensive than paying bridging rates for a few months
• Ignoring exit strategy on a bridge: Without a clear plan to repay, bridging finance becomes very expensive if you need to extend
• Comparing rates without context: A 0.75% monthly bridging rate sounds expensive, but over 6 months the total cost may be modest compared to the profit on the deal
• Not factoring in all fees: Both products carry fees beyond the interest rate. Always calculate the true total cost

Making Your Decision

Ask yourself these questions:

1. How quickly do I need to complete? If within 4 weeks, bridging is likely necessary.
2. Does the property meet standard lending criteria? If not, bridging first then refinance.
3. Do I have a clear exit strategy? If refinancing or selling within 12 months, bridging works. If holding long-term, go straight to a mortgage.
4. What is the total cost of each option? Include fees, interest, and the opportunity cost of delay.
5. What is my risk tolerance? Bridging carries refinance risk. Mortgages provide long-term certainty.

Frequently Asked Questions

Can I switch from a bridging loan to a commercial mortgage?

Yes. This is one of the most common exit strategies for bridging finance. You take the bridge to acquire the property quickly, then refinance onto a commercial mortgage once the property meets standard criteria or you have time to complete the longer application process.

Is bridging finance more expensive than a commercial mortgage?

On an annualised basis, yes. Bridging rates are higher because the loan is short-term and involves more lender risk. However, the total cost over a short bridge period can be modest, and the ability to secure a deal quickly can far outweigh the interest cost.

How quickly can bridging finance be arranged?

The fastest bridging completions happen within 48 hours, though 5 to 10 working days is more typical. This compares to 6 to 12 weeks for a standard commercial mortgage.

Do I need a deposit for both products?

Yes. Both bridging finance and commercial mortgages typically require a minimum 25% deposit (75% LTV). Some lenders may accept additional security in lieu of a larger deposit.

Can I use bridging finance for any type of property?

Bridging lenders are generally more flexible than mortgage lenders on property type. They will consider properties in poor condition, unusual properties, mixed-use buildings, and land — many of which would not qualify for a standard commercial mortgage.

*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*