Commercial Mortgage or Bridging Loan? How to Choose for UK Property
If you are buying or refinancing UK commercial property from abroad, you will often be offered two very different products: a long-term commercial mortgage and a short-term bridging loan. They solve different problems, and choosing the wrong one can cost you time or money. This guide compares them in plain terms and shows when each fits, and when the two work together. It builds on our page on commercial mortgages for expats.
This guide is general information, not financial advice. Lender criteria and costs vary and change often, so the figures below are typical ranges, not offers.
The short answer
- A commercial mortgage is long-term borrowing, repaid over years, and suits property you intend to hold.
- A bridging loan is short-term borrowing, repaid from a sale or a refinance, and suits speed or a property that is not yet mortgageable.
- A bridge costs more per month, so it should only run for as long as you need it.
- Many deals use both: a bridge to buy quickly, then a commercial mortgage to repay it.
Side by side
| Commercial mortgage | Bridging loan | |
|---|---|---|
| Purpose | Buy or refinance property you will hold | Bridge a gap, buy quickly or fund a short project |
| Typical term | Up to 25 years, sometimes 30 | A few weeks to 12 months, sometimes up to 24 |
| Speed | Often four to eight weeks for a straightforward deal | Simple cases in days, most in four to six weeks |
| Loan-to-value | About 65% to 75% owner-occupied, 60% to 70% investment | Commonly up to about 75% on residential security |
| Cost | Base rate plus a margin, with fees | Often about 0.55% to 1.5% a month, plus fees |
| Repayment | Regular payments of interest, or interest and capital | Interest often rolled up, with capital repaid at the end |
| Exit needed | No fixed exit, but you must keep paying | Yes. A clear exit is essential |
When a commercial mortgage fits
- You plan to hold the property for years, for your business or as an investment.
- The property is income-producing, with a lease and tenant a lender can assess.
- You can wait several weeks for completion.
- You want predictable payments and a lower monthly cost.
Lenders assess the property, the lease, the tenant and your finances, and they often test whether the rent covers the interest with a margin to spare, commonly 125% to 150%. For expats, the choice of lenders is narrower and the paperwork heavier, but many specialists lend to non-residents.
When a bridging loan fits
- You must complete fast, for example at auction, where completion is usually within 28 days.
- The property is not yet mortgageable, for example because it needs works or has no tenant.
- You are waiting for another sale or funds to arrive.
- You have a clear, short-term exit, such as a sale or a refinance.
A bridge is priced for speed and short terms. Our page on bridging loans for expats explains the types, and our worked example of bridging loan costs shows what one can add up to.
Using both: bridge, then refinance
A common route is to buy with a bridge, then refinance onto a commercial mortgage once the property is ready. Imagine an invented case: you buy a shop with a flat above at auction for £600,000. You complete within 28 days with a bridge, then spend three months refurbishing the flat and signing a tenant for the shop. With a lease in place, the property qualifies for a commercial mortgage, which repays the bridge.
This works if the refinance is realistic from the start. Ask a broker to confirm at the outset that a lender would accept the finished property, because a bridge with no workable exit is the most common way these deals go wrong.
A worked cost comparison
This example uses invented rates and is not a quote. You borrow £420,000 against a £600,000 property, which is 70% loan-to-value. A commercial mortgage at 7% costs £29,400 a year in interest, or £2,450 a month. A bridging loan at 0.85% a month costs £3,570 a month, which is £1,120 more. Over a six-month bridge that is £6,720 of extra interest. Over three years it would be £40,320, which is why a bridge should not be left in place as long-term borrowing.
Both loans also carry fees. A bridge usually has an arrangement fee and an exit fee, while a commercial mortgage has an arrangement fee and valuation costs. When a deal uses both, you pay the fees on each, so the bridge-then-refinance route costs the bridge’s interest and fees plus the new mortgage’s fees. Add these up before you decide that the speed is worth it.
How to decide
- How long do you intend to hold the property? Years points to a mortgage. Months points to a bridge.
- How quickly must you complete? If a mortgage cannot meet the deadline, a bridge may be the only way.
- Is the property mortgageable today? If not, what has to change, and how long will that take?
- What is your exit from a bridge, and what is the backup if it slips?
- What is the total cost of each route over the time you will actually use it?
What a lender will ask for
- Identity, proof of address and details of your country of residence.
- Accounts, tax returns or other evidence of your income and net worth.
- Bank statements and proof of the source of your deposit.
- Details of the property, including the lease, the tenant and the rent.
- For a bridge, a clear written exit plan.
Having these ready before you apply shortens both routes, and overseas documents often need certifying, which takes extra time.
Common mistakes
- Using a bridge as long-term borrowing, and paying a high monthly rate for years.
- Assuming a refinance will be approved without checking the lender’s criteria.
- Forgetting valuation, legal and arrangement fees on both loans when a deal uses both.
- Comparing a bridge’s monthly rate with a mortgage’s yearly rate.
- Leaving no margin for delay in the exit date.
Related reading
If your project involves building or major works, see our guide to development finance costs. For residential investment, see our guide to an expat buy-to-let mortgage. For the wider picture, see our expat financing hub, our overview of property finance for expats and our page on a commercial property mortgage.
Frequently asked questions
Is a bridging loan cheaper than a commercial mortgage?
No. A bridge usually costs more per month. It can still be the right choice if you need it only briefly.
Can I use a bridging loan before a commercial mortgage?
Yes. A bridge can fund a fast purchase before you refinance onto a commercial mortgage, but you need a clear exit.
Which is faster?
A bridge. Simple cases can complete in days, while a commercial mortgage often takes four to eight weeks.
Can an expat get either one?
Yes, with specialist lenders. The choice is narrower and each lender has its own list of accepted countries.
How much deposit do I need?
Commonly 20% to 40% for a commercial mortgage. A bridge is often available up to about 75% of the security, with many loans at lower levels.
Are these loans regulated?
Usually not for business or investment property, but loans on a home you will live in may be. Check the status before you sign.
This article is for information only and is not financial advice or a recommendation. Commercial lending is usually unregulated, costs vary and the property may be repossessed if you do not keep up repayments. Take advice before you borrow.
