How a bridge loan is underwritten, from enquiry to exit
A bridge loan is short, secured and repaid from a defined event. Underwriting checks the borrower, the property and, above all, the exit.
A bridge loan finances a property for a short period, typically 6 to 18 months, until a sale or a longer-term refinancing repays it. Because the term is short and the repayment event is specific, underwriting focuses on three questions: who is borrowing, what secures the loan, and how it will be repaid.
1. Enquiry and first screen
Most loans arrive through specialist brokers. The first screen checks the purpose, the property type and location, the loan size and the proposed exit. Requests without a credible exit stop here.
2. Borrower
Identity, ownership and sanctions checks (KYC/KYB), track record, credit history and liquidity. For developers and investors, previous projects and the equity they bring are as important as the balance sheet.
3. Property and security
An independent RICS valuation sets market value and, where relevant, a 90- or 180-day value. Title, planning and insurance are checked by solicitors. The loan is advanced at a conservative loan-to-value, and secured by a first-ranking legal charge registered at HM Land Registry.
4. Exit
The exit is tested as hard as the property: comparable sales for a sale exit, or an agreement in principle and affordability for a refinance exit. A fallback exit, usually a sale of the security, must also work at a stressed value.
5. Servicing to redemption
After completion the loan is monitored against milestones, with interest usually retained or serviced monthly. If an exit slips, the lender acts early: extension on terms, a managed sale or, as a last resort, enforcement.
The discipline is simple: short tenors, first charges, conservative advances and a tested exit. Each one limits how far a problem can travel before it is resolved.
For information only; not investment advice. See Legal & Risk.