A 75% bridge does not hand you 75% of the price. Fees and interest come off the top first, so your real deposit is usually closer to a third. Here’s the maths, and how one investor used a bridge to buy a property no mainstream lender would touch, then refinanced onto a buy-to-let mortgage.
When people first look at bridging finance, the number that sticks is the loan-to-value.
A lender offers 75%, and it is natural to assume that on a £200,000 property you will receive £150,000 and need to find £50,000. That assumption is where a great many bridging plans come unstuck.
With short-term finance, the 75% is the ‘gross loan’, the headline figure the deal is built around, and it is not the sum that lands with your solicitor. This article explains the difference, why it matters for the deposit you actually have to fund, and follows one investor who used a bridge to purchase a property no mainstream lender would touch.
Gross loan and net advance: the distinction that changes everything
Every bridging loan quote has two numbers hiding inside it.
Gross Loan
The gross loan is the headline: the figure the lender’s loan-to-value is calculated on.
Net Advance
The net advance is what you actually receive, the gross loan after the costs of setting up the facility have been deducted at completion.
The gap exists because bridging lenders usually take their charges off the top rather than billing you month by month.
The deductions typically include the arrangement or facility fee, usually 1 to 2% of the gross loan; retained interest, where the lender holds back the interest for the whole term at the outset instead of you paying it monthly; and legal, valuation and transfer fees where these come out of the advance. On a longer term with interest retained, the difference between the two figures can be substantial.
Here is how a £150,000 gross bridge over nine months breaks down:
| Gross loan (the 75% LTV figure) | £150,000 |
| Less arrangement fee (1.5%) | £2,250 |
| Less retained interest (0.85% pm × 9 months) | £11,475 |
| Less legal, valuation and TT fees | £2,000 |
| Net advance (cash you actually receive) | £134,275 |
The lender quoted 75%, but only around £134,275 reaches the purchase. That £15,725 gap is the part of a bridge the headline rate never shows you.
Why this decides your real deposit
Because you receive the net advance and not the gross loan, your true cash deposit is the purchase price less the net advance, not a flat 25% of the price.
The gross loan is capped at the lender’s LTV, but fees and retained interest are stripped out before completion, so your own money has to bridge the shortfall between what the property costs and what the lender actually pays over.
On a £200,000 purchase with a 75 percent gross bridge over nine months, that works out as follows:
| Purchase price / open market value | £200,000 |
| Gross first-charge bridge at 75% LTV | £150,000 |
| Less arrangement fee (1.5%) | £2,250 |
| Less retained interest (0.85% pm × 9 months) | £11,475 |
| Less legal, valuation and TT fees | £2,000 |
| Net advance (paid towards the purchase) | £134,275 |
| Cash deposit required (price less net advance) | £65,725 |
So although the loan is quoted at 75%, the real cash deposit here is roughly 33% of the price.
The heavier the fees and the longer the retained interest, the wider that gap becomes. The practical lesson is to work back from the net figure, never the headline loan.
Tell your broker the exact amount you can put in, and let the gross loan be sized so that the net advance, once everything is stripped out, leaves a deposit you can genuinely fund. Two bridges quoted at the same LTV and rate can deliver very different net advances, and therefore very different deposits.
A worked case: buying a property no lender would mortgage
The clearest place to see all of this in action is a property that will not qualify for a standard buy-to-let mortgage at all. The following is an anonymised illustration of a common Drake scenario.
The investor
A landlord found a house listed as cash buyers only at £200,000, comfortably below the road’s usual values because it had been left mid-refurbishment.
The kitchen had been ripped out and never replaced, there was no working bathroom, and the heating did not function. Mainstream lenders declined it on sight: a buy-to-let lender needs a property that is habitable and readily lettable from day one, and a home with no kitchen or bathroom is treated as unmortgageable.
A standard buy-to-let mortgage was simply not available in that state.
The objective
Buy the property, complete the outstanding works to make it habitable and lettable, and then refinance onto a buy-to-let mortgage, keeping it as a rental. The bridge was the tool to get from an unmortgageable property to a mortgageable, income-producing one.
The structure
A first-charge bridge was arranged at 75% of the £200,000 price.
Because the property was being bought purely as an investment to let, this was an unregulated bridge rather than a regulated one. Crucially, the investor understood from the outset that the 75% was gross.
After the arrangement fee, nine months of retained interest and the legal and valuation costs, the net advance was around £134,275, so the true cash contribution needed was about £65,725, not the £50,000 a flat quarter of the price would suggest.
Sizing the loan around that net figure meant the investor arrived at completion with exactly the right funds in place rather than discovering a shortfall days before exchange.
The exit
This is where the case was won before it began.
The exit was a buy-to-let refinance: once a working kitchen and bathroom and functioning heating were installed, the property met ordinary lending criteria and would achieve a market rent, so a buy-to-let mortgage was arranged to repay the bridge in full.
Because a buy-to-let loan is assessed largely on the rental income the finished property will generate, the achievable rent had to support the borrowing, and that was checked alongside the works before any commitment was made. With the refurbishment finished on schedule and a tenant in prospect, the refinance completed and the short-term borrowing was cleared.
The essential point the investor grasped, and many do not, is that the bridge never advanced the full price and never intended to. Planning around the net advance from day one is what made the deposit fundable and the whole deal deliverable.
Related: Light vs Heavy Refurbishment: How Bridging Loans Differ
Why a buy-to-let refinance exit works for an unmortgageable property
A bridge on this kind of property stands or falls on the refinance being genuinely achievable.
Buy-to-let lenders decline a property in poor condition because they need good, lettable security from day one, which is why such properties are marketed as cash buyers only. A missing or non-working kitchen or bathroom is the classic trigger, and no heating, serious disrepair, or an incomplete refurbishment all have the same effect.
The bridge funds the purchase now, the investor carries out the works that make the property mortgageable and lettable, and once the essentials are in place a buy-to-let mortgage is arranged that repays the bridge.
A buy-to-let refinance turns on two things: the finished property meeting ordinary lending criteria, and the rent it will achieve covering the lender’s affordability calculation. Both the works and their cost and the realistic market rent need to stack up before anyone commits. Get that right and the refinance is a clean, predictable exit; get it wrong and the term can run out with no way to repay.
The key points to remember
- A quoted 75% is the gross loan. It is not the cash advanced to you.
- Fees and any retained interest are deducted upfront, so the net advance you actually receive is lower, often by tens of thousands of pounds on a longer term.
- Your real cash deposit is the purchase price less the net advance, which is usually more than a flat 25% of the price.
- Work back from the net figure. Tell your broker what you can fund, and let the gross loan be sized to leave a deposit you can actually meet.
- A bridge can buy an unmortgageable property, funding the works that make it mortgageable so you can then refinance onto a buy-to-let mortgage and keep it as a rental.
- A buy-to-let refinance exit only works if the finished property meets ordinary lending criteria and the rent covers the lender’s affordability calculation, so confirm the works, their cost and the achievable rent before you commit.
- A clear, evidenced exit is essential in every bridging case, and the lender will scrutinise it closely before agreeing anything.
Every bridging case is different, and the right structure depends on the property, your wider assets and your exit.
To talk it through, call Drake Mortgages on 020 8301 7930.
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