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Regulated Bridging Loans are short term secured loans that are regulated by the Financial Conduct Authority. Bridging Loans are regulated where they are secured against a residential property that is owned or soon to be owned and occupied by the loan applicants(s) or their close family.
The difference between a regulated and unregulated Bridging Loan is simply the fact that the former is regulated by the Financial Conduct Authority and the latter is not. The regulation of the loan offers more protection for residential borrowers.
Where the loan is secured on either a commercial or investment property or the loan is in the name of a business, rather than an individual, it cannot be regulated.
Both regulated and unregulated loans only provide finance for a maximum of twelve months.
Most lenders do not allow you the option to pay monthly interest as it accumulates and only offer a ‘roll-up’ option. When interest is rolled up, all twelve months interest payments are deferred until the end of the loan term and added to the final loan amount, meaning that you pay it off in a lump sum.
In order to be accepted for any type of Bridging Finance, you need to have an exit strategy. This is the method you will use to pay off the loan at the end of its term. Whilst there are a number of options available for unregulated borrowers, regulated Bridging Loans only allow for refinance (through a Mortgage) or property sale. Some lenders will exclusively accept property sales, which can be limiting.
Most lenders will define both minimum and maximum loan amounts that can be taken as a regulated Bridging Loan. This is ordinarily between £200,000 and £3,000,000.
There are a number of costs involved in borrowing a Bridging loan, outside of the loan repayments and monthly interest charges.These are:
A regulated Bridging Loan can be very helpful in a number of circumstances. For example:
It is, however, an expensive option and does not come without risks. The loan is secured on your own residential home, so your property may be repossessed if you fail to pay it in full.
As the underwriter regulations on this type of loan are quite strict, it can be difficult to obtain Bridging Loans, depending on your individual circumstance. The lender will also carry out in depth searches on your financial stability and the property you intend to purchase.
It is strongly advised than anyone considering a Bridging Loan of any kind, seeks qualified financial advice prior to making a decision or application.
The only alternative to a regulated Bridging Loan for those buying a residential home they intend to live in themselves, would be a mortgage. Mortgages are usually easier to obtain, however, the application process is months rather than days.
If you want to borrow money for commercial properties or for investment purposes, then an unregulated Bridging Loan is a good alternative. This has fewer restrictions and can be arranged equally as quickly, however it does not offer the security of Financial Conduct Authority regulation.
Sort Finance specialise in Bridging Finance options and can offer qualified financial advice to those considering a regulated Bridging Loan.
Regulated Bridging Finance is only offered by private banks and specialist bridging lenders, who rarely deal directly with members of the public. In order to organise a regulated Bridging Loan, you will need to apply via an authorised Mortgage Broker. Sort Finance can direct you towards those lenders with the most competitive loan option as well as those most likely to consider your individual circumstances.
FCA disclaimer
Based on our research, the content contained on this website is accurate as of most recent time of writing. Lending criteria and policies may change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information.
The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage / financial advice and work only for firms who are authorised and regulated by the Financial Conduct Authority.
They will offer any advice specific to you and your needs. Some types of buy to let, commercial, bridging, mortgages are not regulated by the FCA.
Please think carefully before securing other debts against your home or releasing equity from a property you own. As a mortgage is generally secured against your home or your investment property, it may be repossessed if you do not keep up with repayments on your mortgage.
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Sort Commercial Solutions LTD is authorised and regulated by the Financial Conduct Authority under registration number 949625. Registered in England and Wales under registered number 13207282. Registered office: Kemp House 152-160 City Road, London, EC1V 2NX
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