Development Exit Bridging Explained: Structure and Terms

What Development Exit Bridging Is

You use development exit bridging to repay your development finance facility once construction is complete, buying time to sell units or refinance without an expensive build loan’s clock still running. On many schemes it’s a planned part of the exit, not a rescue.

Your risk profile changes on the day the build finishes, and the price should follow it. The construction risk has gone, the lender is secured against a finished building rather than a site, and the rate drops accordingly, which is what eases your cash flow through the sales phase. If your existing lender won’t re-price at completion, that’s the moment to go and find one who will.

You go on paying build-phase money for risk that has already gone. From the day practical completion is signed off, the development facility is charging against an asset that no longer carries construction risk, and every week you leave it there is a week paid at the wrong price.

How the Bridge Is Structured

You secure the bridge against the completed development, the whole scheme or individual units, and it repays the development facility in full. Crucially, it’s sized on the current market value a Royal Institution of Chartered Surveyors (RICS) valuer confirms, not the projected Gross Development Value (GDV) your build loan used.

Your equity comes back as the sales land. Each time a unit completes, the net proceeds pay down the bridge in tranches under a partial-release mechanism, the solicitor lifts that unit out of the charge, and the balance falls. A development facility won’t do that: it holds the whole scheme until it’s redeemed in full, so nothing comes back to your cash flow until the last sale.

So the bridge does two jobs for you at once. It re-prices the debt, and it lets you take money out before the scheme has finished selling.

Typical Terms

You’ll usually see the bridge advance up to 65 to 75% of the completed development value, over a 6 to 18 month term, at monthly rates of roughly 0.5 to 1% with a 1 to 2% arrangement fee. Interest is often rolled up.

At 70% of the finished value, the loan-to-value works off completed value, not GDV: if a RICS valuation puts the units at £3m and your development loan is £1.8m, a £2.1m facility clears it with headroom.

The number that now decides your loan is what a valuer says the finished units are worth, not the GDV your appraisal ran on. The two are often close. When they aren’t, it’s the bridge that shrinks, and a valuation coming in under the appraisal takes the headroom out before you ever see it, so you find out at the valuation rather than at month-end when the redemption figure lands.

The Exit From the Exit Bridge

You still need a clear exit from the bridge itself, and a lender won’t advance without one. The three standard routes are unit sales, a term refinance, or a forward or bulk sale of the whole scheme.

Selling the units one at a time is the usual route, and it’s why a bridge treats you more gently than an extension does: a slow month costs you interest, where a hard maturity date costs you the facility.

A scheme you’re keeping exits differently, onto a term mortgage once the units are tenanted, so size the term against when you receive the first full month’s rent rather than against the day the builders leave. Whichever route you’re on, the lender wants it evidenced before drawdown: a sales agent’s letter, marketing already under way, or a refinance agreed in principle. An intention is not an exit.

When It Beats Staying on the Development Loan

You’ll gain most when the development term is closing and sales sit around 50 to 75% done, or when your lender’s extension terms are poor. Exit bridging clears the build loan and re-prices the debt for the sales phase.

At 2 to 4% a month, default interest is the real cost of overrunning. Once a development facility passes its maturity date, lenders switch to a penalty rate that dwarfs the gap between a bridge and a build loan, so arranging the bridge before maturity is the sharpest saving on the whole scheme, and it protects your cash flow from a brutal rate rather than a merely expensive one.

You won’t always benefit, though. With only a unit or two left under offer and both close to completing, a fresh arrangement fee and a second set of legal costs can easily come to more than the few weeks of dearer interest you would save. Price the fees on the bridge before you assume the cheaper rate wins.

Development Exit Bridging FAQs