Regulated Bridging Loans
A regulated Bridging loan is a type of short-term financing option used specifically for residential properties. Fluent Money is a specialist Bridging loans broker. We look through an extensive panel of lenders to provide you with options tailored to your specific needs.
On This Page
What is a Regulated Bridging Loan?
Pros of Regulated Bridging Loans
Cons of Regulated Bridging Loans
Residential Bridging Loan Types
Residential Regulated Bridging Loan
Residential Non-Regulated Bridging Loan
What is a Regulated Bridging Loan?
A regulated bridging loan is often used to finance residential home purchase or development if you live in any of the properties you are offering as security. A regulated residential bridging loan provides temporary funds to ‘bridge the gap’ in a property transaction. This gap could be between the purchase of one property and the sale of another or perhaps a property that requires substantial renovation works that need to be completed before the property is eligible for a standard mortgage.
Regulated bridging loans typically have much shorter payback periods compared to traditional mortgages and usually must be repaid within a few months to a year. In the instance of being used for a property chain, the loan amount is often based on the value of the property you are selling, the equity in your current property, and the value of the property you are purchasing.
However a non-regulated bridging loan is used when none of the securities being used for the loan are your home or a home you have lived in. Examples would be a Buy-to-Let property, commercial or retail premises or land for development.
If you have any questions about the differences between the regulated and unregulated loans, get in contact with one of our trained advisors who can you advise you on what is right for you.
Pros of Regulated Bridging Loans
Quick Access to Funds: A regulated bridging loan offers a fast and efficient way to access the funds you need for a property transaction. They are designed to provide short-term financing, often with faster application processes and quicker approval times compared to traditional mortgages.
Flexible Repayment Options: It can typically offer flexible repayment options. You may be able to defer the repayment until you sell your existing property or secure long-term financing, giving you more control over managing your finances during the transition period.
Property Chain Solutions: A regulated bridging loan can help you avoid property chain delays by providing the necessary funds to complete a purchase while waiting for the sale proceeds from your existing property. This can be particularly useful when you need to secure a new home quickly or when there are timing challenges with property transactions.
Cons of Regulated Bridging Loans
Higher Interest Rates: Bridging loans generally have higher interest rates compared to traditional mortgages or other forms of financing. This is due to their short-term nature and potentially higher risk to lenders.
Temporary Solution: Bridging loans are intended as temporary financing solutions. They are not long-term mortgage products. Therefore, you need to have a clear exit strategy in place to repay the loan, whether through the sale of a property, securing long-term financing, or other means.
Important
Think carefully before securing a bridging loan against your property. Your property may be repossessed if you do not keep up repayments on a bridging loan, mortgage or any other debt secured on it.
Fees may be payable depending on your choice of financial product. The actual rate and fees charged will depend upon your circumstances and will be discussed at the earliest opportunity. Ask for a personalised illustration. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Differences Between a Residential Regulated and Non-Regulated Bridging Loans
The main difference between a residential regulated and non-regulated bridging loan lies in the level of regulatory oversight by the FCA and the associated consumer protections. Here’s a breakdown of the key distinctions:
Residential Regulated Bridging Loan
Regulatory Oversight: Regulated bridging loans fall under the regulatory oversight of the Financial Conduct Authority (FCA) in the UK. The FCA sets rules and guidelines to protect consumers, ensuring transparency, responsible lending, and fair treatment.
Borrower Protection: Borrowers of regulated bridging loans benefit from the consumer protections provided by the FCA. Lenders must adhere to specific regulations, including clear disclosure of loan terms, fair treatment, and access to dispute resolution mechanisms.
Consumer Eligibility: Regulated bridging loans are typically available to individuals, sole traders, or certain partnerships for personal, family, or household-related purposes. These loans are commonly used in residential property transactions, where the borrower intends to use the property as their primary residence or for other personal purposes.
Regulatory Requirements: Lenders offering regulated bridging loans must meet certain regulatory requirements, such as conducting affordability assessments, providing clear documentation, and ensuring suitability of the loan for the borrower’s circumstances.
Residential Non-Regulated Bridging Loan
Commercial or Business Purposes: Non-regulated bridging loans are often used for commercial or business purposes, rather than personal use. These loans may be used for property investments, property development projects, or other commercial ventures.
Borrower Eligibility: Non-regulated bridging loans may be available to a wider range of borrowers, including limited companies, partnerships, trusts, and individuals conducting business activities. These loans are suitable for borrowers who fall outside the criteria set for regulated loans.
Flexibility and Terms: Non-regulated bridging loans may offer more flexibility in terms of loan amounts, interest rates, and repayment options. However, the borrower assumes a higher level of risk as these loans are not subject to the same regulatory protections as regulated loans.
It’s important to note that the eligibility, terms, and protections associated with residential bridging loans can vary among lenders. If you appoint Fluent Money as your broker our advisers can guide you through the available options based on your specific circumstances and needs.
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Scenarios for a Residential, Regulated Bridging Loan
A residential, regulated bridging loan would be used in scenarios where the borrower falls within the regulatory criteria set by the Financial Conduct Authority (FCA) and seeks consumer protections provided by regulated loans. Here are some scenarios where a residential, regulated bridging loan might be appropriate:
Property Chain Delays: If you are in the process of selling your existing home and purchasing a new one, but there is a delay in the property chain, you may opt for a regulated bridging loan. This loan can provide the necessary funds to complete the purchase of the new property while awaiting the sale proceeds from the existing property.
Downsizing or Upsizing: If you are planning to downsize or upsize your property, you may need short-term financing to bridge the gap between selling your current home and purchasing a new one. A regulated bridging loan can help facilitate the smooth transition between properties.
Property Renovation: If you intend to renovate your residential property for personal use, a regulated bridging loan can provide the necessary funds for the renovation work. Once the renovation is complete, you may refinance with a traditional mortgage or sell the property to repay the loan.
Probate Property: In situations where you inherit a property through probate and wish to sell it, a regulated bridging loan can provide the funds needed for any necessary repairs or improvements before selling the property.
Temporary Financial Need: If you are facing a temporary financial need or cash flow challenge, a regulated bridging loan can offer a short-term solution. This could include situations like bridging a gap between the sale of an asset and the availability of funds, meeting a tax obligation, or addressing unexpected expenses.
In these scenarios, a regulated bridging loan ensures that you benefit from the consumer protections and regulatory oversight provided by the FCA. This includes transparency in lending practices, clear terms and conditions, and adherence to responsible lending standards.
Scenarios for a Residential, Non-regulated Bridging Loan
A residential, non-regulated bridging loan may be desirable in specific scenarios where you are purchasing a residential property for commercial purposes or when you do not fall under the FCA’s regulatory criteria for regulated bridging loans. Here are a few scenarios where a residential, non-regulated bridging loan might be considered:
Buy-to-Let Investment: If you intend to purchase a residential property with the primary purpose of renting it out and generating rental income, a non-regulated bridging loan may be suitable. Since the property is being acquired for investment and commercial purposes, it falls outside the scope of regulation for consumer protection.
Property Development: Suppose you plan to acquire a residential property with the intention of renovating, extending, or converting it into multiple units for resale or rental. In that case, a non-regulated bridging loan might be appropriate. Property development projects are typically considered commercial ventures, and the financing required falls under the non-regulated category.
Business Use: You may acquire residential properties to utilise them for business purposes rather than as your primary residence. For instance, you might want to convert a residential property into an office, bed and breakfast, or a guesthouse. In such instances, a non-regulated bridging loan could be considered as it aligns with the commercial nature of the property use.
Non-Standard Borrower: Non-regulated bridging loans might be a consideration if you fall outside the FCA’s regulatory criteria for regulated loans. For example, if you own a company that is purchasing the property such as a limited company, partnership, or trust rather than you as an individual, you may opt for a non-regulated bridging loan.
Who We Work With
We work with leading lenders across the market to match you with the right deal.
FAQs
Yes and no. As mentioned above, the interest rates are typically higher than a long-term mortgage. However, if you are using the loan for the right purpose it doesn’t have to be expensive.
An example can be a customer taking out a £100k loan to renovate a property and pay all applicable taxes on it, which they then sell for £400k without investing any of their money. Even with high interest rates the profit still justifies the loan.
In summary, a Bridging Loan is a short-term lending vehicle designed to be used when there are no more cost effective solutions, we have vast experience in sourcing the cheapest and most flexible deals in the market.
Good idea: It allows you fast access to finance when required, and flexibility, as a short-term solution to your particular problem. Properties that are not mortgageable or the need to downsize are just a couple of examples.
Not a good idea: If there are other lending solutions that are available to you such as a residential mortgage, Buy-To-Let Mortgage or a secured loan, then we will highlight this at the very start of your enquiry with us, we are regulated by the FCA and pride ourselves on providing the very best level of advice, all calls maybe recorded and we document any advice that we give to you.
At Fluent Money, we offer bridging loans for both residential and commercial purchases. We can also advise on ground-up development finance.
Bridging finance options and the speed are conditional upon the lender and circumstances. Sometimes Bridging Loans can be arranged in a matter of days, other more complex transactions can be 6-8 weeks, our advisors will always try to manage your expectations before you commit to a Bridging Loan.
Bridging is a short-term loan where you need to make sure you are on track with paying it back. Interest rates are more expensive compared to mortgages and can get even more so if you don’t pay back on time. Some lenders can start charging fees at the end of the loan term.
Like any other loan secured on property your home is at risk if you do not keep up repayments on it.
Regulated: Used for personal purposes secured by your private home.
Non-regulated: Investment purposes like Buy-to-let or building a house to then sell on (known as a flip).
With some lenders, yes. As with any finance application, taking out a Bridging Loan affects an individual’s credit file and could impact the ability to gain finance in the future, your dedicated adviser will be on hand to explain in great detail how this would work for each applicant
You are in safe hands with Fluent, as well as our specialist Bridging Loan advisers we also have Mortgage Advisors in house so we can provide a rounded view and give you personal advice on all aspects of the Mortgage/Bridging Loan process.
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Why Our Customers Recommend Fluent Money®
We’re one of the UK’s favourite finance brokers. Don’t believe us? See what our customers have to say:
Amazing
First time using the service for a bridging loan as our house sale completion was effectively taking longer than expected and had to break the chain to ensure we were able to complete house purchase. Matt was really helpful in explaining options, costs and finding the option that tailored to our needs. Gemma then helped through the steps to completion – all in all took a week to complete the whole process. Fantastic service.
Excellent Start to Finish
Once I had decided to accept the Bridging loan, I downloaded the app and it was very easy to use and the messaging service was the most efficient way I have ever had the pleasure to communicate via. From the initial enquiry, I was informed every step of the way. Every query was answered immediately via the instant message on the app (very impressive). Thank you to Gemma and her team.
What an amazing company!
We needed a bridging loan and chose Fluent Money. The whole process was seamless. I can’t recommend them highly enough!
Great service from first enquiry to completion
This is the first time we’d needed a bridging loan, but Fluent led us through the process. They were friendly yet very professional, from Ellie who answered my first query, through Matt, to Jessica, who was so supportive right through to the end. Nothing seemed to phase her. She always answered really quickly, and settled our wobbles. We weren’t prepared for some of the weirder questions from the lending bank’s solicitors, but that wasn’t the fault of Fluent! Jessica always managed to calm us!
Bridging Finance Success
Fluent successfully placed my bridging finance application, on standard terms, after four previous rejections with other brokers. Broker fee was relatively high but not due until after completion. My Adviser and Case Manager were both very helpful and efficient.
