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Regulated Bridging Loans

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A regulated bridging loan is a short-term loan secured against a property that you, or a close family member, live in or intend to live in.

It is designed to bridge a short-term gap, usually where money is needed before longer-term finance or a property sale completes.

This could be where you are buying a new home before your current property has sold, or where a property needs work before a standard mortgage can be arranged.

What makes a bridging loan regulated?

A bridging loan is usually regulated when it is secured against a property that you, or a close family member, live in or plan to live in.

The Financial Conduct Authority defines a bridging loan, in this context, as a regulated mortgage contract with a term of 12 months or less. The FCA also sets out rules for regulated mortgage contracts and responsible lending.

Because the loan is regulated, the lender must be authorised by the Financial Conduct Authority. The adviser arranging the loan must also follow FCA rules.

This gives you additional protection, but it also means there are fewer lenders available compared with the unregulated bridging loan market.

At Mortgage Solutions, we have access to a wide range of FCA-regulated bridging loan providers and can help you find the right option for your circumstances.

When would you use a regulated bridging loan?

A regulated bridging loan may be useful where:

  • You are buying a new home before your existing home has sold.
  • Your property sale has been delayed, but you still need to complete your purchase.
  • You need short-term funds to secure a property quickly.
  • You are buying a property that needs renovation before a normal mortgage can be arranged.
  • You or a close family member live in, or will live in, one of the properties being used as security.

How does a regulated bridging loan work?

The loan is arranged for a short period, often a few months and usually no more than 12 months.

The lender will want to understand how the loan will be repaid. This is known as the exit strategy.

A clear exit strategy is one of the most important parts of any bridging loan application.

Common exit strategies include:

  • Selling your existing property.
  • Remortgaging onto a standard residential mortgage.
  • Completing renovation works so the property becomes mortgageable.
  • Using confirmed funds from another source to repay the loan.

Example of when regulated bridging finance may help

You may have found the property you want to buy, but your current home has not yet sold.

Rather than lose the property, a regulated bridging loan may allow you to complete the purchase now. The loan is then repaid when your existing property sells.

Another example could be where you are buying a property that needs substantial renovation. Some lenders may not offer a normal mortgage until the work has been completed. A bridging loan may provide short-term funds to buy or improve the property before moving onto a standard mortgage.

How much can you borrow?

The amount you can borrow will depend on the property value, the level of equity available, the lender’s criteria, and how the loan will be repaid.

In a property chain, the lender may consider:

  • The value of the property you are buying.
  • The value of the property you are selling.
  • The equity in your current home.
  • Any mortgage already secured against the property.
  • Your planned exit strategy.
  • The overall risk of the case.

Every case is different, so the figures need to be checked carefully before you proceed.

Interest and repayments

With some bridging loans, the interest can be rolled up and added to the loan. This means you may not need to make monthly payments during the term.

Instead, the interest and charges are repaid when the loan is cleared.

This can help with cash flow, but it also means the balance can increase during the term. We will explain the full cost before you decide whether to proceed.

Things to consider

Bridging loans can be quick and flexible, but they are not the same as a normal mortgage.

They are usually more expensive than standard mortgage products and must be repaid within the agreed term.

Before arranging a regulated bridging loan, we will explain:

  • The interest rate.
  • The lender fees.
  • Valuation and legal costs.
  • Any broker fee.
  • The monthly or rolled-up interest position.
  • The repayment plan.
  • The risks if the loan is not repaid on time.
  • Whether a standard mortgage or another option may be more suitable.

Why use Mortgage Solutions?

Regulated bridging loans are a specialist area of finance.

Not every bridging lender offers regulated bridging loans, and not every case will fit standard lender criteria.

We can look at your circumstances, explain your options, and help you understand whether regulated bridging finance is suitable.

We will also look at the alternatives, including whether a standard mortgage, further advance, remortgage, or other type of finance may be more appropriate.

Speak to a regulated bridging loan adviser

If you need short-term finance to bridge the gap between buying, selling, renovating, or refinancing a property, speak to one of our mortgage team.

We can explain the options clearly and help arrange suitable regulated bridging finance where it is appropriate.

Call Mortgage Solutions today to see how we can help.