The Open Bridge at the Tail of a Scheme
Nine of twelve apartments have completed. The three left are the ground floor unit next to the bin store, the one with the north facing terrace, and a top floor flat priced £30,000 above the others because it has the view. They will sell. Nobody can say when, and no lender writing a bridging loan will accept “spring, probably” as a repayment date.
That is the definition of an open bridging loan in practice. Not a loan for people who have not thought about the exit, but a loan for a situation where the exit is real, evidenced and genuinely undated, because the timing belongs to somebody who has not appeared yet. Open bridging loans are the working money of the last mile of a development, and these loans are priced for the uncertainty they carry rather than for any doubt that the units are saleable.
What is an open bridging loan?
An open bridging loan is a short term loan secured on property where the repayment event is identified but not contractually dated.
The comparison makes it clearer. A closed bridging loan carries exchanged contracts, a signed block sale or a formal mortgage offer, so the lender knows the date. An open bridging loan carries a valuation, a marketing programme and a plan. Both are bridging loans. Both sit on a first charge over property. Only one of those loans has a diary entry against it.
On residual development stock the open bridging loan is the normal case, and it is worth being blunt about why. A developer cannot exchange contracts on a flat nobody has offered on. Requiring a dated exit before writing a loan against unsold units would mean these loans could not exist at all, so the market prices the uncertainty instead. Open bridging loans sit in the upper half of the 0.55 to 1.0 percent a month band across our lender panel, where a closed bridging loan sits in the lower half of the same band.
There is a category of open bridging loan that deserves less sympathy, and lenders separate the two carefully. A loan against stock that is actively marketed, viewed and priced to comparable evidence is a timing question. A loan against stock that has sat on the market for fourteen months at a price no buyer has ever met is a pricing question, and no loan solves a pricing question.
One more distinction is worth making early, because borrowers conflate it with the open and closed split. Whether a loan is regulated depends on who occupies the property, not on whether the exit is dated. Lending against a home the borrower or their family lives in is regulated business arranged only by firms holding the relevant permissions. Every loan described here is secured on trading stock, which is unregulated commercial lending.
How do lenders underwrite a bridging loan they cannot date?
By replacing the missing date with evidence, and by writing the loan over a term long enough that being wrong about the date is survivable.
Four things do that work. Comparable evidence is the first: Land Registry records of completed sales in the same postcode over the previous 12 months, which is the only independent proof that units of this type transact at this price. A valuer’s opinion supported by six recent Land Registry transactions carries more weight with a bridging loan underwriter than any amount of agent enthusiasm.
The second is velocity. Where nine units in the scheme have already sold, the lender has a real rate of sale from the borrower’s own project rather than a market average. Nine completions in seven months is roughly 1.3 units a month, and three remaining units at that pace suggests a little over two months of ordinary selling, with a generous margin for the awkward ones. Velocity is the single most persuasive number in an open bridging loan application.
Third is the quality of the remaining stock. Underwriters know which units sell last, and they discount the loan for it. Ground floor flats beside refuse stores, single aspect units, anything above a commercial unit, and the most expensive apartment in a block all take longer. A lender pricing bridging loans against the tail of a scheme is pricing the least attractive units, not an average of the whole scheme.
Fourth is the fallback. Where the sale does not happen, what repays the loan? A lettings exit that would support a term loan, a bulk sale to an investor at a modelled discount, or a refinance onto a portfolio loan. Open bridging loans get written comfortably where a second answer exists. These loans get declined where the only answer is a better market.
What types of exit strategy actually work on residual stock?
Four types, and a borrower who can evidence two of them will be offered better loans than one relying on the first alone.
Individual sales at market price. The primary route on most bridging loans of this kind, evidenced by comparables and by the scheme’s own completed sales. Its weakness is that it is the exit strategy the lender is already worried about, so on its own it does not answer the question.
A discounted bulk sale. Selling the remaining units as a block to an investor. Model it honestly: bulk buyers of residual new build typically bid 10 to 20 percent below aggregate individual value, and a lender sizing the loan will assume the lower end. If the loan still clears at that discounted figure, an underwriter can approve it without having to believe the optimistic number.
A lettings exit onto term debt. Let the residual units and refinance the bridging loan onto buy to let or commercial mortgages from 5.5 percent a year, tested on rent covering 125 to 150 percent of the payment. That converts the exit strategy from a sales problem into an income problem, and income problems are far easier to fund. It takes time, which is exactly what the loan is for.
A refinance of the whole tail. Where the borrower has a portfolio, folding the residual units into a wider portfolio loan repays the bridging loan without requiring a sale at all.
The weak exit strategy types are recognisable. “The market will pick up.” “We will drop the price if we have to.” “My brother in law is interested.” An exit strategy is a plan with a number attached and a party who can perform it. Anything else is a hope, and bridging lenders have heard all of them several times this month.
How much can you borrow against the last few unsold units?
Less than you could borrow against the whole scheme, and the reason is concentration rather than value.
Bridging loans against residential property run to 75 percent of value across our lender panel, and against commercial property to 65 or 70 percent. Those ceilings apply cleanly to a whole block of stock. On the last three units of a twelve unit scheme, expect the working figure to fall to somewhere around 60 to 70 percent, and expect the valuation underpinning the loan to carry a discount as well.
The arithmetic on a real tail looks like this. Three remaining units with aggregate individual values of £310,000, £285,000 and £420,000, so £1,015,000 in total. A valuer producing a 90 day figure may discount that to £950,000, and a lender assuming a bulk sale may size the loan from £820,000. A bridging loan at 65 percent of £950,000 is £617,500, which is a very different number from 75 percent of £1,015,000, and the gap between those two loans is the whole of the argument you will have with the underwriter.
Two things lift how much you can borrow. Selling one more unit before you apply changes the concentration profile and often moves the loan a full leverage band. And offering additional security, another property in the portfolio, is frequently the cleanest way to raise the loan amount when the residual stock alone will not support how much the borrower needs.
One thing lowers it further. Where all remaining units sit in one building in one postcode, some funding lines apply a concentration haircut to the loan on top of everything else, because a single local event affects every unit securing it at once.
How much does an open bridging loan cost, and what does an overrun cost?
The rate is the small part of what a bridging loan costs. The cost of being wrong about the term is the large part, and it is the number almost nobody models.
Start with the ordinary case. Bridging loans price from 0.55 percent up to 1.0 percent a month across our lender panel, over the Bank of England base rate of 3.75 percent held since December 2025. An open bridging loan on residual stock typically sits at 0.75 to 0.95 percent a month. On a loan of £600,000 at 0.85 percent, the monthly bridging loan cost is £5,100, so £61,200 over twelve months, plus an arrangement fee of 1 to 2 percent and the usual valuation and legal costs on both sides. Borrowers routinely quote the rate to each other and forget that the fees add a further £10,000 to £18,000 to what the loan costs.
Now model the overrun, because this is where open bridging loans behave differently from a closed bridging loan in a way that shows up in cash. A closed loan repaid on its contracted date costs what the offer said it would. An open loan that runs past term does one of three things. It is extended by agreement, typically for a fee of 0.5 to 1 percent plus the ongoing rate. It rolls onto a default rate, commonly two to three times the contractual monthly rate, so a bridging loan cost of £5,100 a month becomes £10,000 to £15,000 a month. Or it is refinanced by another lender, which means paying a second set of arrangement, valuation and legal costs to buy the same time the borrower could have bought at the start.
That comparison produces the single most useful piece of advice about these loans. Take the longer term. The marginal cost of a loan written over eighteen months rather than nine, where interest is charged only for the months actually used, is close to nothing. The cost of taking nine months and needing fourteen is a fee, a default rate, or a refinance. Ask specifically whether interest is retained for the full term or serviced monthly, because that answer decides whether a longer loan is free or expensive.
How long can an open bridging loan run?
Up to 18 months in the ordinary market, and the term should be set by the slowest plausible sale rather than the expected one.
Short term secured lending runs from 1 to 18 months across our lender panel, and residual stock loans are usually written at 9 to 18 months. Some funding lines will consider 24 month loans on strong cases with material equity, and those lenders are worth finding where the tail of a scheme is genuinely awkward.
Set the term against evidence rather than optimism. If the scheme’s own sales have run at 1.3 units a month and three units remain, the expected clearance is a little over two months, but expected is doing dangerous work in that sentence. The units left are the difficult ones, so double the estimate, then add three months for conveyancing, mortgage offers and chains. Nine months is a reasonable planning figure for three residual units. Twelve is safer, and the difference in what the loan costs is small.
There is one structural reason not to take the longest available loan regardless. Some bridging loans carry minimum interest periods, so a loan written for eighteen months with a six month minimum costs six months of interest even where the property sells in month two. Where a minimum term applies, size the loan against the fastest plausible sale rather than the slowest, and take the trade off deliberately.
Can you get a bridging loan with bad credit on an open exit?
Yes, and adverse credit matters less on these loans than borrowers expect, because a bridging loan is underwritten on the property and the exit.
A bridging loan with bad credit on the borrower’s file is a normal transaction on the specialist side of the market. The lender is asking whether the credit history threatens the security or the exit, not whether it produces a good score. County court judgments that could become charges, unpaid HMRC liabilities, live insolvency proceedings and defaults on secured borrowing all matter to a bridging loan underwriter. Old unsecured defaults, a thin credit file and a run of recent searches largely do not.
Where the exit is open as well as the credit adverse, the two factors compound. Expect the loan at 60 to 65 percent of value rather than 75, pricing at the top of the band, and a lender who wants the fallback exit evidenced in detail rather than described. That is a workable loan, not a refusal, and several funding lines write nothing else.
The one thing that turns a manageable bad credit case into a dead one is late disclosure. Adverse credit found by the lender’s own search after the valuation has been paid for costs the borrower money and costs the broker credibility. Put it on the table in the first conversation, with an explanation and evidence of what has been settled since.
Is an open bridging loan a good idea on a nearly finished scheme?
Where the alternative is default interest on an expired development facility, yes without much argument. Where the alternative is a price cut you were going to make anyway, no.
Work the comparison in pounds. Three residual units, an outstanding development loan of £600,000, and a facility that matured last month. Default interest at two and a half times a 6.5 percent annual rate is roughly £8,000 a month and rising, with no plot release mechanism and a lender who now has a problem loan on their book. An open bridging loan at 0.85 percent a month costs £5,100 a month, releases charges as each unit sells, and buys twelve months. That is not a close question, and it is the situation in which most of these loans are written.
Now the other comparison. The same three units, but the top floor flat has had two viewings in five months and every agent says it is £40,000 over the market. Bridging loans buy time, and time does not fix a price. A borrower who takes a twelve month loan costing £61,200 to avoid a £40,000 reduction has spent more than the reduction and still owns the flat.
So the test is diagnostic rather than financial. Where the stock is correctly priced and simply has not met its buyer, an open bridging loan is exactly the right product and there are plenty of lenders who will write it. Where the stock is mispriced, the loan postpones the decision at roughly £5,000 a month. Take an honest view before you borrow, not in month nine of a twelve month loan.
What work should the borrower do before applying for the loan?
Three pieces of work, and doing them properly shortens the process by weeks and improves the terms of the loan.
Assemble the completion pack. Practical completion certificate, building regulations sign off, structural warranty covering each remaining unit, service and installation certification, and evidence that occupation related planning conditions are discharged. Missing warranty documents are the most common cause of a six week loan taking twelve weeks to complete, and no amount of chasing produces them faster once the building is closed up.
Build the sales evidence file. The agent’s instruction and marketing history, viewings and offers on each remaining unit, completed sales from the scheme itself with dates and prices, and Land Registry comparables for the postcode. A lender who can see that nine units completed at an average of £268,000 over seven months does not need to take anybody’s word about how much the last three will fetch.
Model the fallback in writing. A single page showing what happens if no unit sells: the letting income each would achieve, the rent cover against a term loan, and the bulk sale price at a 15 percent discount to aggregate value. Where the loan still works on those numbers, say so on the page. Underwriters approve what they can verify, and a borrower who has already done the pessimistic arithmetic is a much easier case than one who has only done the optimistic version.
One final point on how much this work matters. Two developers with identical stock asking to borrow identical amounts will be offered different loans, and the difference is not luck. It is that one arrived with a documented file and a fallback, and the other arrived with a brochure. Open bridging loans are underwritten on evidence, and the borrower controls the evidence.
If your scheme is finished and the last units are still on the market, we arrange development exit finance across a panel of over 100 lenders. Where the requirement is short dated borrowing against property for any other purpose, that is bridging loans. Where the residual units will be let rather than sold, commercial mortgages are the cheaper long term answer, and where construction is still running, it is development finance.
Construction Capital is a trading name of Lenzie Consulting Ltd, registered in England and Wales, company number 08174104. We are a commercial finance broker and introducer, not a lender, and we are not authorised by the FCA. Where a case is a regulated activity we arrange it through lenders who hold the relevant FCA permissions. Rates, fees and terms are indicative, vary by lender and deal, and are never an offer of finance. Written by Matt Lenzie.