Blog post
March 13, 2020

What is the difference between unregulated and regulated bridging loans? 

See our unregulated bridging loan products.

Bridging finance is popular for the flexibility it offers to professional property developers, property investors and homeowners.

While it is more commonly used for business purposes, homeowner bridging loans – more commonly referred to as regulated bridging loans – were more than a third of the UK bridging market in 2019

Bridging loans can either be regulated or unregulated. In both cases lenders will require security, commonly a 1st or 2nd charge against a property owned by the borrower. It is also necessary to have a clear exit strategy and awareness of the risk that the security will be repossessed if the loan is not repaid.   

Something to consider about this type of lending is, as short-term loans, bridging loan interest rates are relatively high. Your home may be repossessed if you do not keep up repayments on your mortgage.

Regulated mortgage lenders in the UK must be authorised by the Financial Conduct Authority (FCA).  

In this piece we will explain the differences between a regulated and unregulated bridging loan: 

What is a regulated bridging loan? 

Broadly, a regulated bridging loan is a loan secured against a property which the borrower currently occupies or intends to. 

The main difference between this and an unregulated bridging loan is that the transaction is not intended for business purposes.

What is a regulated bridging loan used for? 

By far the most common use of a regulated bridging loan is in circumstances where there is a chain break. Buyers may use a regulated bridging loan to ensure they can purchase the new property before selling their own.

Aside from the property chain break there are a minority of regulated bridge cases that are driven by the personal circumstances of the borrower with an immediate need to raise cash, or to refurbish a property before exiting to longer term finance.

What is an unregulated bridging loan? 

Generally speaking the FCA does not regulate loans where the secured property or intended purchase is for business purposes. 

A business is normally assumed to be able to understand and assess contracts they are signing and commitments they are making, without the need for the same protection afforded consumers. 

Even with this assumption, it is important for the business to understand what they are signing. The assumption is that a professional in the trade will do so with a level of industry knowledge. 

Learn more about bridging loans on our blog.

What is an unregulated bridging loan for? 

Common commercial uses of an unregulated bridging loan include: 

  • Purchasing land for the purpose of obtaining planning permission before a development
  • Funding works to a property
  • Securing residential, commercial and semi-commercial property quickly
  • Purchasing properties at auction
  • Purchasing and refurbishing a property for resale
  • Securing a property to make improvements ahead of getting a Buy-to-Let mortgage. 

Learn more about these types of products, including rates, fees and where you can get instant quotes, on our product page. 

Issued by LendInvest Loans Limited, which is authorised and regulated by the Financial Conduct Authority (ref: 737073) in the UK to enter into (as lender) and administer regulated mortgage contracts.

Your home (and any other property used as security) may be repossessed if you do not keep up repayments on your mortgage. Bridging loans are short-term, high-rate interest loans and fees apply. A mortgage adviser can recommend the most suitable mortgage for you.

Luke Stevenson
Posted by Luke Stevenson
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