Change of use bridging finance: funding a building between one use and the next

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What is change of use bridging finance used for?

Buildings rarely stay in one use for their whole life. A bank branch closes, an office floor sits empty, a warehouse is too small for modern logistics. The buyer who can put that building to a better use is often the one who can pay the most for it, but they cannot get a commercial mortgage until the new use is up and running. That gap is where change of use bridging finance fits.

Typical projects we see include:

• Office to medical or dental clinic, gym, nursery or other service use.
• Retail to restaurant or cafe, including fit-out for kitchens and extraction.
• Industrial or warehouse to trade counter, showroom or self-storage.
• Office, pub or large house to hotel, serviced accommodation or an HMO.
• Former pubs, churches and community buildings to commercial or mixed uses.

The common thread is that the value or income after the change is higher than before, and the bridge is repaid from that uplift by sale or refinance.

Which changes of use need planning permission?

Since September 2020, Class E in England groups shops, restaurants and cafes, offices, light industrial, clinics, nurseries and indoor sport into one use class. Moving between uses inside Class E does not usually need planning permission for the change of use itself, although building works, signage, shopfronts and extraction flues often do. Moving outside Class E usually does need consent.

From	To	Usual planning position	Lender focus
Office	Clinic, gym or nursery	Within Class E, so often no planning for the use	Fit-out cost, any regulator registration, tenant or operator
Shop	Restaurant or cafe	Within Class E; extraction and external works may need consent	Kitchen fit-out, premises licence, lease user clause
Shop	Hot food takeaway or bar	Sui generis, so planning permission needed	Planning certainty, local objections
Warehouse	Trade counter or showroom	Depends on the scale of retail sales; take planning advice	Whether the end use is lawful and lettable
Office, pub or house	Hotel	Change to Class C1, planning permission needed	Trading projections, operator experience
Commercial building	HMO	Planning permission in almost all cases	Licensing and the HMO mortgage exit

This is a summary, not planning advice. Article 4 directions, conditions on earlier consents and local policies can all change the answer, so confirm the position for your building with a planning consultant. For HMO projects, see HMO conversion finance; for pubs, see pub and restaurant bridging loans.

How do lenders value a building during a change of use?

Valuers can produce three different figures for the same building, and knowing which one the lender is using avoids disappointment:

Valuation	What it reflects	How lenders use it
Current value	The building in its existing lawful use and condition	The basis for the day-one loan
Value with planning	The building with consent for the new use, before works	Can support a larger loan or refinance once consent is granted
Value in the new use	The completed, let or trading property	Tests whether the exit will repay the bridge

Lenders lend against what exists, not what you hope to create. If you are buying before consent is granted, the loan is sized on current value and the planning gain is your exit. Our page on bridging loans for planning permission covers that strategy in more depth.

Specialist end uses, such as hotels or clinics, are often valued with regard to trading potential or the strength of the operator. That usually means a lower loan to value than a plain office or shop, and a valuer with sector experience.

What exit strategies do lenders accept after a change of use?

Every bridging lender asks how you will repay. After a change of use, the credible routes are:

• Let and refinance. You secure a tenant in the new use and refinance onto a commercial investment mortgage. Lenders will look at the lease length, the tenant's covenant and the rent. Our commercial bridge to let page explains this route.
• Occupy and refinance. Your own business moves in and you refinance onto an owner-occupier commercial mortgage, assessed on the trading accounts.
• Sale with the benefit of the new use. You sell the building with planning in place or with a tenant signed, capturing the uplift.

A strong exit strategy has evidence behind it: a heads of terms with a tenant, an agent's letting advice, comparable sales or a decision in principle from the refinance lender. The more concrete the exit, the better the terms the broker can obtain.

What makes you eligible for change of use bridging finance?

Bridging lenders are led by the property and the exit more than by your income, but they still assess the borrower. Expect them to look at:

• The security: location, condition, current use and how saleable it is if the plan fails.
• Your contribution: the deposit and works budget you are putting in, and where it comes from.
• The exit: a realistic route to repay within the term.
• Experience: a track record with similar projects helps, especially for hotels, restaurants and HMOs.
• Credit history: adverse credit is not an automatic bar, but it must be disclosed and explained.
• The borrowing entity: limited companies and SPVs are common, usually with personal guarantees from the directors.

Most of these loans are secured by a first charge on the building. Where there is already a mortgage you want to keep, a second charge may be possible with the first lender's consent.

How much is a 200k bridging loan for a change of use?

We do not quote a headline rate on this page, because the price depends on the loan to value, the property, the planning position and your profile. What we can show is how the cost is built up on a £200,000 loan:

Cost	How it is charged	On a £200,000 loan
Interest	Monthly, retained, rolled up or serviced	Depends on the rate and term; lower LTV prices better
Arrangement fee	Typically around 1% to 2% of the loan	For example, £2,000 to £4,000
Valuation	Paid upfront to a RICS valuer	Depends on the property and its use
Legal fees	Your solicitor and the lender's	Quoted per case
Exit fee	Some lenders only	Avoid where possible

Use our bridging cost calculator to model the total cost over 6, 9 or 12 months, and see our rates page for how lenders price commercial bridging.

Is change of use bridging regulated or unregulated?

A bridge secured on commercial property for a business or investment purpose is normally unregulated, and we arrange it directly. Most change of use projects fall into this category.

It may be a regulated mortgage contract if the security includes a home for you or a close family member, now or in future: for example, a building with a flat you plan to live in, or a loan secured on your own house to fund the purchase. Regulated bridging must be arranged by a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the FCA, so we introduce those cases to a firm that is.

Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.