Regulated Bridging Loan

Short-term borrowing secured on the home you live in — or plan to — with the protections of FCA regulation built in.

A regulated bridging loan is short-term finance secured against the home you live in — or the one you are about to move into. Because the security is your main residence, the loan sits under Financial Conduct Authority regulation, with the extra protection and the shorter maximum term that brings.

What is a regulated bridging loan?

‘Regulated’ borrowing is lending secured on a property that you — or a member of your immediate family — will occupy. For most people, that is the standard mortgage on their home. Buy-to-lets, investment properties and developments are generally unregulated, though certain family and consumer buy-to-let cases are regulated. With a regulated bridge, the regulated part means the loan is secured on a property that you or a related person will live in — now, or at some point in the future.

The essentials:

Term — 12 months maximum on a regulated loan; unregulated bridging can run to 24.
Interest — retained by the lender at the outset, not paid monthly.
Underwriting — led by the exit strategy rather than income or credit score.
Protection — FCA regulation applies because your home is the security.

Regulated or unregulated — which do you need?

The usual question is: will you live in the property? If yes, it is regulated. But a ‘no’ does not settle it — occupation by a related person, such as a parent or an adult child, can bring the loan inside the regulated perimeter even though you will never live there yourself, and certain consumer buy-to-let cases are regulated too. We confirm which applies to your case before you commit.

From the borrower's side, the two products feel similar. The visible difference is the term — up to 24 months on an unregulated loan against a 12-month maximum on a regulated one. For the broker there is considerably more work in the background on the regulated side, but that is our problem rather than yours.

Who uses one

Nine times out of ten, a regulated bridge solves a timing mismatch: you are selling your current home and have found the next one, but the dates don't line up. The loan funds the new purchase so you can move in; when the sale of the previous home completes, the proceeds repay it.

Less commonly, owners use one to fund work on their existing home that a standard mortgage won't cover — a £500,000 house with £100,000 of extension or refurbishment work, say. The loan is repaid afterwards by refinancing onto a term loan, or from pension drawdowns, bonuses or other capital. It works, but it is the rarer case.

How much can you borrow?

Terms run very close to standard bridging: most lenders cap the gross loan at around 65% to 70% loan to value. If you are funding refurbishment work, you are unlikely to need that much.

On a purchase, the structure can go further. Where you are buying an onward home and selling your existing one, and there is enough equity in the current property, the lender can cross-charge the two — taking security across both. Structured that way, the loan can reach 100% loan to value, or slightly more where the equity allows, leaving you to cover only legal and valuation fees rather than putting cash into the purchase.

Costs and early repayment

Most regulated bridging lenders charge no early repayment penalty and rebate the unused interest — though some apply a minimum interest period (commonly three months), so always check the specific product. Again, as with the standard bridging loan process, most lenders will retain up to 12 months’ interest upfront. For every month you repay the loan early, you'll get a rebate of that interest. So it's in your interest to repay the loan as soon as you can.

The retained structure also answers the monthly-payment question: there isn't one. A few lenders will allow borrowers to service the interest subject to affordability, but most regulated lenders now prefer the retained structure — from a cash-flow perspective they want your exit, not a monthly payment, to be the focus. The interest builds within the loan and is repaid when you redeem.

The process

Proof of income isn't required; proof of exit is. If the exit is the sale of your existing home, the lender will want to see the property listed and a valuation that supports its saleability. If the exit is a refinance after refurbishment, they will want at least a Decision in Principle from a mortgage lender for the amount in question — evidence they will be repaid.

On timing: a regulated bridge can be arranged in two to three weeks at the quickest, and within a week in genuinely urgent cases. We tend to suggest a four to five week timeline — it gives valuers and solicitors time to do their work properly, without charging extra for working at a rush.

Our role is to structure the transaction and present the exit strategy in the way that best suits both the lender and you, drawing on a panel of 135+ lenders to secure the right terms.

Frequently asked questions

Can I get a regulated bridging loan if I'm self-employed?

Yes. Underwriting runs much as it does on a standard bridge: credit score and income carry little weight next to the exit. The one caveat is consistency — if your stated exit is a refinance with a high-street bank, the lender will want a Decision in Principle showing that refinance is realistic. Prove the exit is viable and it matters little whether you are employed or self-employed, or what you earn.

Can I get a regulated bridging loan with bad credit?

Yes. We have arranged regulated bridges to stop a repossession, and for clients with defaults and missed mortgage payments on file. The exit carried each case: the clients were selling assets — buy-to-let properties already on the market, alongside a downsize from the main residence — with substantial equity in the deal.

Are second charge bridging loans regulated?

It depends on the purpose. A second charge on your primary residence used for business purposes is unregulated. Used for a consumer purchase — a car, a holiday, refurbishments to your own home — it will qualify as regulated in almost all lenders' eyes.

Can I waive my rights and take an unregulated loan instead?

No — even though that would simplify matters for many borrowers. Lenders would not take the risk even if it were possible. Where your primary residence is the security, the borrowing will always qualify as regulated.

Listen to the episode

Regulated bridging is covered in more depth on the Propertyze podcast.

Your home may be repossessed if you do not keep up with your mortgage repayments.

To put numbers to your own scenario, use our bridging loan calculator — it estimates interest, fees, net advance and LTV.

Bridging loans · Chain-break bridging · Open bridging · Closed bridging · Case study: dream home completion

Full transcript — “Regulated Bridging Loan”

Recorded November 2023. A conversation with Scott West of Propertyze, transcribed in full. 10 minutes · approximately 1,838 words.

Read the transcript

Hello, and this time on the Bridging Finance podcast, we have Scott West back from Properties to talk us through a regulated bridging loan. Great to chat with you again, Scott. How are you today? Very well, thank you. Looking forward to doing this one. Yeah, definitely. Well, let's dive straight in then. So first of all, what is a regulated bridging loan and what does regulated mean and how does this affect me? People would like to know. The short answer is regulated is anything that you are going to live in. Anything that's going to become your primary residence. So for most people, that is your standard mortgage you have in your home with your lawyer, Barclays, Howie Factor, whatever it might be, your home

residential mortgage would be regulated. Mitre lets our investment bridging loans are largely investment development. So they're all unregulated loans. When it comes to regulated bridge, the regulated part just means it's for you to live in. So it's specific to something that you will be living in and making your primary residence at some point in the future. Okay. So a clear definition there. And I think the next two questions follow on from that really. What is the difference between regulated and unregulated bridging finance and how do I know which loan I need? I'll do that in reverse. You'll know which one you'll need by answering simply the question, do you plan to live in the property? If the answer is yes, it's regulated. If the answer

is no, it's unregulated. The difference between the two from the client's perspective isn't a great deal. The difference to us as brokers is a lot more work in the background. But the primary difference that clients will see is the terms. So on an unregulated loan, you can go to 24 months. On a regulated loan, it is limited to 12 months maximum. The difference really is that you are capped a maximum of 12 months, even if it's going to be a regulated bridging loan. Okay. So hopefully that makes sense there. And again, you might have touched on this question really there, but what can I use a regulated bridging loan for? Most of the time, we don't see a great deal of these, but most of the time when we do

come across them, it's people who are selling their current home and have found a new property to buy, but the timings don't quite line up. So they'll use the regulated bridging loan to purchase the new property, move into it while the sale of the previous home goes through and then they'll reuse the sale proceeds to repay the loan. So that is the ninth of that 10, the time that we'll see them. On the odd occasions, people who already own their own home and want to do refurbishment to it with a repayment vehicle being from something else. So for example, they have their 500,000-pound home. They want to do a hundred grand, 200 grand worth of work to it to extend it, basements, whatever it might

be, refurb work that you couldn't do on a standard mortgage. So they'll take the loan out, do the refurbishment work, and then either refinance onto a term loan afterwards or repay that with pension drawdowns or bonuses or whatever it might be. Right. Okay. So moving on then, how much can I borrow? Similar, the terms will be very similar to a new bridging loan, 65, 70% loan to value maximum. That's a gross loan. Most of the time, you probably want to be borrowing that high on them if you're doing the refit works. Obviously, if it's a purchase,

we can go to 100% loan to value if we cross charge the two assets. So in this scenario where you're buying an onward purchase and selling your existing, if there's enough equity in the existing one, we can put the bridging loan across both properties, the existing and the new one, to cover the entire purchase. So you don't have to put any money in to the purchase and we'll just use all the equity across both properties. Obviously, with the exception of legal fees and valuation fees, et cetera. But so we can borrow 100% or even slightly more if the equity allows for it. Right. Okay. So that's good news there. Now, what documents will I need to provide when applying for a regulated bridging loan is proof of income required?

Proof of income isn't required, but proof of exit is required. That's a fixed one that we can't get around. The lenders will want to see either the listing for the existing property, if it's an onward purchase. They want to see it listed online and have a valuation done properly or see the valuation report previously to see the saleability of it. If it is being used for refinance to do the refurbishment works, they'll want to see an offer in principle from a lender to cover the difference for the exit. So if you're borrowing 50 grand for refi works, they'll want to see at least a £50,000 decision in principle with a high-strict bank or somebody else to ensure that that can be repaid. Okay. There we go. Now, can I get a regulated bridging loan if I'm self-employed? So any

differences? No differences there at all. From the client's perspective, it runs very similar to a standard bridging loan. Credit, income, those sorts of things aren't hugely important. You can still get one. The difference being, obviously, we have to prove the exit strategy. So if you have poor credit or you have no income, we can't then say that your exit strategy is every finance with a high-strict bank because it's just unlucky to go through. So hence, they want to see the decision in principles. So as long as we can prove the exit and the exit is viable and sensible, it doesn't really matter whether you're self-employed, employed, high income, low income, good or poor credit, as long as the exit is viable. Okay. Now, are second-charge bridging loans

regulated? Yes and no. Depends on the purpose. So for a second-charge bridging loan on your primary residence, if the use of those funds is for business, it's unregulated. If the use of those funds is for a consumer purchase, cars, holidays, refurbishments on your own home, they will qualify as regulated in almost all lenders' eyes. So it depends on the purpose if it's a second charge. Right. Okay. So that makes sense there as well. Now, moving on then, what happens if the loan or the regulated bridging loan is repaid early? If the loan is repaid early, there are no penalties and you will get a refund of the interest you haven't used. So again, similar to the standard bridging loan process, the lenders will retain 12 months worth of interest upfront. And then for every month

you repay the loan early, you're going to rebate of that interest. So it's in your interest to repay the loan as soon as you can. Okay. So that's something to bear in mind there. People would also like to know, can I get a regulated bridging loan with about a credit? Yep, absolutely. I've done some before where it's a stop and repossession or with very bad credit defaults, missed mortgage payments, all absolutely fine. Again, it's just proving the extra strategy. So the other clients and those examples were selling assets. They had properties for sale from their buy-to-get portfolio and they were downsizing from their primary assets to a smaller one. There was loads of equity in the deal. The transaction

stood up, the cash was going to come out of their sales. So they got a regulated bridging loan. Okay. So a great example there. And hopefully that sounds reassuring to anybody listening to this. Do I have to pay the bridging interest each month people would like to know? No. They are retained by the lender. There used to be a few examples of lenders allowing you to service the debt. But with the regulated funds now, I don't think I've seen a lender that will allow you to do that purely because from a cash flow perspective, they want to make sure the extra strategy is the primary focus and not have you worrying about making the payments each month. You don't service the loan on a monthly payment. It is all built

up in the loan and repaid at the point you redeem. Right. Okay. So that's clear there. Now this is interesting. Can I waive at my rights and take an unregulated loan? Unfortunately not. That would simplify things for lots of people, but unfortunately not. Even if that was possible, hypothetically, the banks just wouldn't risk it. When it comes to your prime residence, nobody wants to make you homeless. Nobody wants the lender to make you homeless. So it's just not going to happen. They will always take it very seriously and it will always qualify as regulated. Okay. So a clear no there. There we go. That answers that. Now I think that the next question you've already answered this really. Can I pay back the money early?

Yeah, that's virtually the same question as before. Can I repay the loan early? So yeah. There we go. So two questions left then. How long does a regulated bridging loan take to arrange and how long will my regulated bridging application take to complete? Those two kind of the same thing, I guess, to arrange, again, as quickly as two or three weeks tend to say to people, think of a four or five-week timeline. It gives you comfort and ease without having to stress and chase your tail. It gives the valuers and the sisters time to get their work done competently without having to charge you extra for working at a rush. But in some cases, we can really rush them forward and complete very, very quickly.

Within a week, some of them can be done. But think of a four or five-week timeline and you won't be disappointed. Okay. So that gives you a good kind of timeframe there. And just lastly then, how do I apply for a regulated bridging loan? And I'm guessing, Scott, this is where a broker like Propertyze can come in and help. Absolutely. Drop us an email. Speak to a broker. It's the best solution for those because they will help you understand the transaction and process the extra strategy in the way that best suits the lender yourself and make sure you achieve the best terms as well. There we go. Well, thank you, Scott, as always. Again, hopefully this episode has proved useful to anybody listening and Scott, I'm sure we'll speak to you again soon.

Look forward to it. Thank you very much.

This is a transcript of a spoken conversation recorded in November 2023, published as recorded and lightly corrected for names and technical terms only. It is general information about how this type of lending works, not advice on your circumstances. This recording is more than eighteen months old. Any rates, fees, loan-to-values or criteria mentioned reflect the market as it stood when this was recorded and are not current pricing and not an offer of finance — for today’s figures, speak to an adviser.

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