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Are Bridging Loans Regulated by the FCA?

Are Bridging Loans Regulated by the FCA?

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There are two different categories of bridging loan - regulated and unregulated.

While the phrase 'unregulated' might sound a little circumspect, this is actually a catchall term used for any bespoke lending, agreed on a case-by-case basis, for financing projects that do not relate to a residential home.

If you take out a bridging loan against your home, you will need a regulated product. Regulated means that the lender must comply with the Financial Conduct Authority rules, which are around preventing mis-selling, and the provision of independent advice.

Are Unregulated Bridging Loans Safe?

Indeed, this is a bridging loan used for commercial businesses or borrowers using a bridge loan to buy an investment property.

Since each investment is unique, the nature of the lending is tailored to each applicant's circumstances.

Are There Different Types of Regulated Bridge Finance?

There are since lenders will need to look at your exit strategy's strength as their primary decision-making factor.

Some niche regulated bridge loan categories are as below:

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What are the Eligibility Criteria for Regulated Bridging Loans?

The criteria are much the same for any bridging loan, and the exit strategy is the most critical factor, with lenders considering:

  • How likely you are to achieve the anticipated resale value for the property.
  • Whether you have the expertise to carry out renovation or development work.
  • If there is an agreement in principle for a remortgage exit strategy.

Other criteria include:

  • Your experience in property investments or developments.
  • What sort of property you wish to buy - unusual projects are higher risk.
  • Credit history, and whether you have had any repossessions or severe credit issues in the past.
  • How much deposit you have available. The minimum is usually 30% to 35%, but the more you can put down, the lower the rates you will achieve.
  • The security on offer is also important - and how easy it would be to sell that asset in a repossession scenario.

Is There a Maximum I Can Borrow on a Regulated Bridging Loan?

There isn't a fixed maximum, but lenders will usually have a minimum. This value could be as low as £10,000 or might be up to £50,000.

Are Residential Bridge Loans Available as Second Charges?

If you have an existing mortgage and wish to take out a bridging loan secured against the same property, you will need specialist broker advice to negotiate this.

You can secure a bridge loan as a second charge, but this isn't common, and you will need a larger deposit.

Which Sort of Bridging Loan is Suited to a Buy to Let Investment?

Should you be using short-term bridging finance to buy a rental property, you will need commercial unregulated bridging finance.

Many investors use a bridge loan, to be replaced by a buy to let mortgage from the same lender, known as a bridge to let deal.

Expert Advice with Regulated Bridging Loans

If you're looking for fast, short-term finance on a residential property, it is vital to seek advice from an independent, FCA registered broker.

Contact the Revolution Brokers team on 0330 304 3040, or email us at info@revolutionbrokers.co.uk to explore the best rates currently available on the market.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies 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 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 mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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