Where the 25% to 30% comes from
Most bridging lenders cap first charge residential loans at about 70% to 75% of value. The rest of the purchase price is your deposit. For commercial property, land or more complex cases, lower loan to value limits mean larger deposits, often 30% to 50%.
Lenders use the lower of the price and the valuation. If you agree £400,000 but the property is valued at £380,000, the loan is based on £380,000 and the shortfall comes from your funds.
Why you need more than the deposit
Two things add to your cash requirement:
- Gross loan sizing: if retained interest and the arrangement fee sit inside the maximum loan to value, the cash released is lower than 70% to 75% of value. See gross loan and net advance.
- Purchase costs: stamp duty, your legal fees, the valuation, and any auction fees are normally paid from your own funds.
An illustrative £300,000 purchase with a 75% gross loan, nine months of retained interest and a 2% fee could need around £100,000 or more of your own money once costs are added, rather than £75,000.
Using other property instead of cash
If you own property with equity, a lender can take a charge over it as additional security. The combined value then supports a larger loan, sometimes enough to cover the full purchase price. This is common for chain breaks and portfolio investors.
A second charge bridge on property you already own is another way to raise the deposit, subject to your first lender's consent.
Where the deposit can come from
Lenders and solicitors must check the source of your deposit. Savings, sale proceeds, business profits and gifts are all common, each with its own evidence. Gifted deposits usually need a letter from the donor and evidence of their funds. Borrowed deposits are viewed more cautiously, and some lenders will not accept them unless disclosed and secured on other property.
Working out your figure
Start with the price, apply a realistic loan to value to the lower of price and expected valuation, take off retained interest and fees if they sit inside the loan, and add stamp duty and costs. That is your cash requirement.
Instant Quotes shows the net advance from each lender on our panel, which makes this calculation easier. For development projects, see how much deposit for development finance.
Auction and refurbishment purchases
Auction purchases add a timing point. The auction deposit, commonly 10%, is paid from your own funds on the day, and the balance of your contribution is due at completion. Make sure your total cash covers the deposit, the rest of your share of the price, the buyer's premium and all purchase costs.
Refurbishment purchases add the cost of the works. Some lenders fund works in stages, but releases are usually paid in arrears, so you need cash to start the works and carry each stage. Others fund only the purchase, in which case the full works budget comes from you. A contingency for overruns is sensible in either case; see light vs heavy refurbishment.
Building these into your budget early avoids a shortfall shortly before completion, the point at which it is hardest to fix.
Common questions
What is the minimum deposit for a bridging loan?
Typically 25% to 30% of the lower of price and valuation for residential property, more for land and commercial property, plus purchase costs.
Can I get a bridging loan with no deposit?
Sometimes, if you offer other property as additional security. The combined value can support the full purchase price.
Can my deposit be gifted?
Many lenders accept gifted deposits with a gift letter and evidence of the donor's funds.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
