Bridging loans are a type of short-term property backed loan. They are no different to long term mortgages in that they are secured by a first charge, or a second charge against your property. Because they are secured, the same steps of valuation and preparation of a legal charge deed have to be taken as with a normal term mortgage.

However, bridging loans are designed to be arranged quickly, and to run for a 1-36-month duration. Interest is taken from the loan balance at the start of the term, with the option to pay back the balance at any time, usually with no exit penalties. As the loan duration increases past 18 months most lenders look for the loan to be serviced with monthly interest payments. Because interest payments are already taken from the loan balance, there are usually no affordability checks.

Bridging loans can be used to help businesses bridge the gap between making a purchase and other funds becoming available. They are often used to buy one property while you wait to sell another.

• Property development

• Refurbishment

• Paying a tax bill

Bridging loans are used by property developers at auctions who need to pay a deposit to secure their purchase at short notice.