Open vs closed bridging loan:which structure fits your commercial deal?
The open vs closed bridging loan distinction is about the exit: a closed bridging loan has a fixed repayment date backed by an exit that is already contracted, such as an exchanged sale, while an open bridging loan has no fixed repayment date and can be repaid at any point within the maximum term once your planned exit happens. Both are short-term finance secured on property; the difference is how certain the lender can be about when, and how, it will be repaid.
This guide compares the two side by side, gives illustrative commercial examples of each and explains how lenders treat them on offices, shops, industrial property and land. If you are new to the product, start with our guide to what a commercial bridging loan is.
Key takeaways
A closed bridging loan has a fixed repayment date backed by a contracted exit such as an exchanged sale.
An open bridging loan can be repaid any time within its maximum term once the planned exit happens.
Most commercial bridges are open, because exits depend on letting, works, planning or refinance.
Closed bridges carry less risk for the lender and can be priced more keenly.
Choose an open bridge term that allows for realistic delays, not an optimistic one.
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What is the difference between open and closed bridging loans?
A closed bridge is arranged when the exit is already locked in. Typically you have exchanged contracts on the sale of another property, or have a confirmed source of funds arriving on a known date, and the bridge simply covers the gap. The lender knows the repayment date from the outset.
An open bridge is arranged when the exit is planned but not yet contracted. You might intend to sell, refinance onto a commercial mortgage or obtain planning permission, but none of that is certain on day one. The loan runs for a maximum term, and you repay whenever the exit completes within it.
Both still need a credible exit strategy. An open bridge does not mean an open-ended loan; it means the date is flexible within agreed limits.
How do open and closed bridges compare side by side?
Feature
Closed bridging loan
Open bridging loan
Repayment date
Fixed, linked to a contracted exit
Flexible, any time within the maximum term
Exit certainty
High, such as exchanged contracts
Planned but not yet contracted
Typical term
Short, often weeks to a few months
Up to the lender's maximum, commonly 6 to 18 months
Lender risk
Lower
Higher
Pricing
Can be more keenly priced
Reflects the extra uncertainty
Evidence needed
Exchanged contract or confirmed funds
Credible plan with supporting evidence
Availability on commercial property
Less common
The norm
In both cases the loan can be secured by a first charge or a second charge; see first vs second charge bridging for how charge position affects terms.
Why are most commercial bridging loans open?
Commercial bridging is usually taken because something needs to happen to the property before longer-term finance is possible: it needs letting, refurbishing, a change of use or planning permission. Exits like that cannot be contracted on day one, so most commercial bridges are open by nature.
Lenders are comfortable with open bridges on commercial property, but they look harder at the exit. Expect questions such as:
If refinancing, does the property and your profile fit a term lender's criteria once works or letting are complete?
If selling, what do local agents say about demand and price?
If the exit depends on planning, what is the fallback if consent is refused or delayed?
Is the term long enough to allow for delays?
Have a deal in front of you?Send us the property and the numbers. We will tell you quickly whether it is fundable.
Closed bridging loan: an illustrative example
The following is illustrative only, using round numbers.
For example, a trading company has exchanged contracts to sell its existing warehouse for £900,000, with completion in ten weeks. It has found larger premises that must be bought now, and needs £600,000 to complete. A lender provides a closed bridge secured on the new premises, with the warehouse sale proceeds as the contracted exit.
Exit: exchanged sale, completion date known.
Term: set to cover the gap plus a small margin.
Lender's view: the main risk is the buyer failing to complete, so it checks the contract and the buyer's deposit.
Auction purchase: an investor buys a vacant shop at auction for £400,000, must complete within 28 days, then plans to refurbish, let and refinance onto a commercial investment mortgage. There is no contracted exit on day one, so the bridge is open, with a 12 months term. Read more on auction bridging finance.
Land awaiting planning: a buyer acquires land for £750,000 and applies for planning permission, intending to sell with consent or move onto development finance. The timing depends on the planning authority, so the bridge is open, with a longer term to allow for delay. See bridging for planning permission.
In each case, the lender sets a maximum term and the borrower repays as soon as the exit completes, subject to any minimum interest period.
What are the key differences between a closed and an open mortgage?
The terms are used differently for mortgages. Where a mortgage is described as open, it usually means you can repay or overpay without early repayment charges; a closed mortgage restricts early repayment or charges a penalty for it. That usage is more common in some overseas markets than in the UK.
For bridging, open and closed refer to the exit date, not to repayment penalties. Most bridging loans, open or closed, can be repaid early, although many have a minimum interest period. If you are weighing a bridge against a mortgage, our commercial bridging vs commercial mortgage guide compares them in detail.
How should you choose between an open and a closed bridge?
In practice the choice is usually made for you by your exit. If you have exchanged contracts or have confirmed funds on a known date, ask about a closed bridge, which may be priced more keenly. If your exit depends on future events, you need an open bridge, and the priority is choosing a term long enough to cover realistic delays.
Match the term to a cautious, not optimistic, exit timeline.
Check the minimum interest period and any exit fee.
Understand the extension terms in case the exit slips.
We compare open and closed options across our panel of bridging lenders and explain the trade offs before you apply.
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.
What is the difference between open and closed loans?
In bridging, a closed loan has a fixed repayment date because the exit is already contracted, such as an exchanged sale. An open loan has no fixed date and can be repaid at any time within its maximum term once the planned exit happens. Closed loans carry less risk for lenders; open loans give borrowers flexibility when the exit is not yet certain.
Why would you get a bridging loan?
Businesses and investors use bridging loans when they need to move faster than a mortgage allows, or when a property cannot yet be mortgaged. Typical reasons include auction purchases, buying before selling, refurbishing or converting a building, buying land before planning permission and raising capital quickly. The loan is repaid from a sale or refinance.
Is a closed bridging loan cheaper than an open one?
It can be. Because a closed bridge has a contracted exit and a known repayment date, the lender's risk is lower, which can be reflected in pricing or LTV. In practice the difference depends on the lender, the property and the strength of the exit. Closed bridges are also less widely offered on commercial property, so compare both.
How much is a 200k bridging loan?
For illustration only, if a lender charged a hypothetical 1 per cent a month, a £200,000 open bridge repaid after 9 months would cost £18,000 in simple interest. Add an arrangement fee of around 1% to 2% of the loan, valuation and legal costs. Real pricing depends on LTV, property and exit, so treat this as arithmetic.
Can I repay an open bridging loan early?
Yes. The point of an open bridge is that you can repay whenever your exit completes within the maximum term. Many lenders apply a minimum interest period, often a few months, so very early repayment still incurs that minimum. With retained interest, check whether unused interest is refunded. Exit fees, where they apply, are payable on redemption.