BRIDGING

LOAN

A bridging loan is short-term financing, typically for 12 to 36 months, designed to cover the timing gap between two liquidity events. Common uses include buying a new property before selling the current one, funding a development, and using the asset as collateral.
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50+ financial institutions

BANK FINANCE

Bank bridging loans are provided through traditional finance, based on income and debt-to-income ratios. They offer between 50% and 65% of the appraised value, with interest rates linked to Euribor plus a margin of 2% to 4%, interest-only payments, terms of 12 to 36 months, and completion within 8 to 12 weeks.

PRIVATE CAPITAL

When bank finance is not an option – for example, when the applicant cannot demonstrate recurring income – private capital provides an alternative. This route is based on the asset (an unencumbered property) and a clear exit strategy, rather than the applicant’s income. It offers LTVs of 45% to 65%, rates of 10% to 15%, terms of 6 to 36 months (ideally 12–18 months), and funds available within 3 to 4 weeks without going through a bank credit committee.

Key Features of a Bridging Loan

A bridging loan is used when its cost is lower than the cost of losing the opportunity. The most common situations are a timing gap between two liquidity events, insufficient time to finance a purchase through a traditional bank, or an asset-rich borrower who does not generate recurring cash flow.

WHEN YOU NEED A BRIDGING LOAN

01

Buying Before Selling

You have found the property you want, but your current home has not yet sold. The bridging loan finances the purchase while you complete the sale.

02

Auction or Fixed Deadline

The transaction has a fixed deadline – an auction, a competitive sale process, or a seller who cannot wait.

03

Bridge Finance During Construction or Refurbishment

You need temporary finance to acquire the property while arranging the building licence or preparing to begin a major refurbishment.

04

Delays in Licences or Permits

Long-term finance is conditional on a pending licence or permit. The bridging loan covers the waiting period.

05

Timing Gap Between Sale and Purchase

The sale of your current property has been agreed but has not yet completed, and you need access to the funds now.

06

Investment with Committed Future Liquidity

You know that you will receive capital proceeds in the future, but you need finance now to avoid losing the opportunity.

07

Bridge Between Land Acquisition and Development Finance

You need to acquire land, but bank construction finance will not become available until the required permits are granted.

08

Borrowers Without Recurring Income

In some cases, a bridging loan is the only viable option because the applicant cannot demonstrate recurring income.

HOW A BRIDGING LOAN WORKS

01

Valuation

The lender values the property used as security. This may be the existing property, the new property, or both.

02

Loan Structuring

The loan is structured as short-term finance, typically for 12–36 months, with interest-only payments.

03

Fund Disbursement

The funds are released to purchase the new property.

04

Repayment

The loan is repaid when the original property is sold or when long-term finance is completed.

TYPICAL TERMS

Parameter Private Capital
LTV 45% - 65%
Interest Rate 10%–15% (fixed)
Term 6–36 months (ideally 12–18)
Completion Timeframe 3–4 weeks
Repayment Interest-only (bullet repayment at maturity)
Arrangement Fee 0% - 3%
Minimum Loan Amount From €200,000
Security First-ranking mortgage over an unencumbered asset
Decision Basis Unencumbered asset + clear exit strategy

Frequently Asked Questions About Bridging Loans

What security is used for a bridging loan?
The security can be the existing property, the new property, or both. The choice depends on the transaction structure and the lender’s preferences.
Yes. Non-residents can obtain bridging loans in Spain, although the terms may vary. AVF works with lenders that finance non-residents.
It depends on the route. Through a bank, it takes 8–12 weeks. Through private capital, it takes 3–4 weeks.
There are several options: renew the bridging loan, refinance to a long-term mortgage, or negotiate an extension with the lender. It is essential to structure the transaction with a clear plan B from the outset.
Bank route: Euribor + 2% to 4% (variable). Private capital route: 10% to 15% (fixed). The bank route is cheaper but requires recurring income and more time.
In many cases, yes. AVF can structure the transaction from the outset with this conversion planned.

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If you are considering a real estate transaction in Spain and want to understand which options make sense to explore, we would be happy to talk.

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