Open vs Closed Bridging Loans: Which One Do You Need?

What is a closed bridging loan?

A closed bridging loan is one where the repayment is already arranged before the loan is made. The lender knows when the money is coming back and where from, and has seen the evidence. The classic case is a chain break after exchange: you have exchanged contracts on the sale of your current home with a completion date in six weeks, and you need to complete on your purchase next week. The sale proceeds are the exit, the completion date is the repayment date, and the contract is the proof.

Because the exit is fixed, the loan is short (typically 1–12 months), the lender's risk is low and the pricing reflects that. The term is usually set a little beyond the expected repayment date to allow for ordinary delays. Interest is normally retained or rolled up, so there are no monthly payments, and there is no early repayment charge after a minimum period of one to three months if the exit lands early.

What is an open bridging loan?

An open bridging loan has a planned exit but no confirmed date. You intend to sell the property, or refinance once works are done, or wait for a planning decision, but none of that has happened yet. The lender still needs to believe the exit is realistic, and will underwrite it carefully, but there is no contract or offer to point to.

Open loans are the majority of the bridging market: refurbishment projects, auction purchases that will be refinanced later, development exits where units are not yet sold, land awaiting planning. Terms are usually longer (12 months is standard, 18–24 available) and the rate is higher because the lender is pricing the chance that the exit takes longer than planned.

How do open and closed bridging loans compare?

Indicative, November 2026. Lender criteria vary; see the product page for current figures.

What counts as a confirmed exit?

Lenders will only treat a loan as closed when the exit is documented. What they accept:

• Exchanged contracts on the sale of a property, with a completion date. This is the strongest evidence and the most common closed exit.
• A formal mortgage offer (not an agreement in principle) on the property or another asset, with a valid expiry date beyond the bridge's expected repayment.
• A signed development exit or term facility from another lender, with conditions precedent that can be satisfied inside the bridge term.
• Documented funds arriving on a known date: probate grant with distribution timing, a maturing investment, a court settlement, a confirmed business sale with exchanged contracts.

What does not count: a property that is "under offer", a mortgage agreement in principle, an agent's appraisal, a buyer who "is keen", or your own expectation of when something will happen. All of those are open exits. Good ones, perhaps, but open.

Why is a closed bridging loan cheaper, and by how much?

The lender's return on a bridge comes from the interest it earns over the term; its risk is that the term runs out before the exit happens and it has to extend, chase or enforce. A closed exit removes most of that risk, so the lender can price lower and still make its margin. In practice the gap is typically 0.1–0.3% a month on the rate, which on a £400,000 loan over six months is roughly £2,400–£7,200.

Closed loans also tend to be cheaper in other ways: the term is shorter so less interest is retained, the underwriting is quicker so fewer extension or re-valuation fees arise, and there is less chance of the default interest that kicks in when an open loan overruns.

Which one do you need? Six common situations

1. You have exchanged on your sale and need to complete your purchase first. Closed. The exchanged contract is the exit. Ask for a term two to three months beyond the sale completion date.
2. Your sale is agreed but not exchanged. Open. Many chain-break borrowers are surprised by this. Once you exchange, some lenders will re-price to closed terms or allow an early repayment without penalty.
3. You are buying at auction and will refinance onto a buy-to-let mortgage. Open, unless the mortgage offer is already issued on that property, which at auction it almost never is. See the auction finance guide.
4. You are refurbishing and will sell or refinance when the works finish. Open. The exit depends on the works, the market and a valuation that has not happened yet.
5. Your existing bridging loan is expiring and you have a new term mortgage offer in hand. Closed. The offer is the exit; the bridge covers the gap until it completes. See refinancing a bridging loan.
6. You are a developer with units exchanged but not completed. Closed on the exchanged units, often structured as a development exit loan with the completions as staged repayments.

A worked example: the same chain break as closed and as open

A couple are buying a £650,000 house and selling their £480,000 flat. They need £300,000 to complete the purchase before the flat sale completes. Here is how the bridge looks depending on whether they have exchanged on the flat.

The open loan is not wildly more expensive if the flat sells quickly, because unused retained interest is refunded. The difference is what happens if it does not: the closed borrower has a contract; the open borrower has a 12-month clock and a rising cost. Figures are illustrative and rounded.

What happens if a closed exit slips?

Exchanged sales do fall through, mortgage offers do expire and completions do get delayed. A closed loan is not immune; it is simply priced on the assumption that these things are unlikely. If the exit slips inside the term, nothing happens beyond interest continuing to accrue. If it slips past the term, the lender will usually offer an extension, often at a higher rate and with a fee, and may re-underwrite you as an open loan.

Regulated or unregulated: does it change the open/closed question?

No, but it changes who can lend to you. A bridging loan is regulated by the FCA when it is secured on a property you or a close family member live in or will live in. Most chain-break bridges are therefore regulated, and regulated lenders typically cap terms at 12 months and apply affordability and advice rules. Investment property, buy-to-let and commercial bridges are unregulated. Both regulated and unregulated loans can be open or closed; the distinction is about the exit, not the regulatory status. Aura Capital is not FCA-authorised; where a regulated bridge is needed we refer you to an authorised adviser.