You’re about to buy your new home when your buyer pulls out at the last minute.
The seller won’t wait, and you risk losing the property. It’s a situation many homeowners face – but there’s a solution.
Regulated bridging loans can help homeowners cover these temporary funding gaps, letting you move forward with property purchases even when you haven’t yet sold your home.
Because these loans are associated with your home, they must be regulated by the FCA.
Let’s look at how regulated bridging loans work, who they’re for, and how to get one.
What Are Regulated Bridging Loans?
A regulated bridging loan is a short-term loan secured against your main residence or a property you or your family plan to live in.
The key difference from other bridging loans is FCA regulation, which gives you extra protection as a borrower.
These loans work well when you need quick access to funds for your home purchase. For example, if you’ve found your perfect home but haven’t sold your current property, a regulated residential bridging loan can help you secure the new property while you complete the sale of your existing one.
The FCA’s rules mean that lenders must follow strict rules about how they treat you. They must be clear about costs, check you can afford the loan, and ensure you understand the risks. This protection helps prevent unfair treatment and gives you more rights if something goes wrong.
Many people confuse regulated and unregulated bridging loans.
The main difference lies in the property use – if you’re borrowing against a property you’ll live in, you need a regulated loan. For buy-to-let, pure investment or commercial properties, an unregulated loan would apply.
Related: What Are Unregulated Bridging Loans and How Do They Work?
44% of bridging loans are regulated
In the last three months of 2024, 44% of bridging loans were on a regulated basis, and 56% were unregulated.
How Regulated Bridging Loans Work
Think of a regulated bridging loan as a short-term mortgage.
You borrow money against your property, but unlike a mortgage, you’ll repay the full amount within a few months to a year.
All in one go.
Here’s a real example: Sarah found her perfect home for £500,000 but hadn’t sold her current house worth £400,000. She took out a regulated bridging loan to buy the new property, using both houses as security. Once she sold her old home, she repaid the bridging loan.
With bridging, approval comes quickly – often within a couple of weeks.
You’ll need to show the lender:
- The property details
- Your exit strategy (how you’ll repay the loan)
- Proof you can afford the payments
- Evidence of the property’s value
Most loans run for 6-12 months. You can usually borrow up to 75% of your property’s value, depending on your circumstances and exit strategy.
As an unregulated loan is outside of FCA regulation, you can achieve loan terms of 24 or even 36 months.
A regulated bridging loan is restricted to a maximum of 12 months.
Who Needs a Regulated Bridging Loan?
Common Scenarios
You might benefit from a regulated bridging loan if you’re:
- Moving house but haven’t sold your current home
- Buying at auction and need funds quickly
- Renovating your main residence
- Breaking a property chain
- Dealing with unexpected delays in a property purchase
Eligibility Requirements
To qualify, you’ll need:
- A property to secure the loan against
- A clear exit strategy
- Enough equity in your property
- A reasonable credit history
Let’s talk bridging loans!
Who Decides Which Loan You Need?
The type of bridging loan you need isn’t actually a choice – it’s determined by strict rules set out by the Financial Conduct Authority (FCA).
These rules are based on how you’ll use the property.
The FCA makes it clear:
If you or your immediate family members plan to live in the property, you must have a regulated loan.
This applies whether you’re moving in straight away or planning to live there after some renovations. The rules protect you as a consumer when your home is involved.
Your lender must follow these FCA guidelines. They’ll ask about your plans for the property right at the start of your application. If you say you’ll live there, they have to offer you a regulated loan – there’s no wiggle room here.
But what if your plans change?
Say you take out an unregulated loan to buy a rental property but later decide to move in yourself. You’d need to inform your lender immediately. They might need to switch you to a regulated loan or suggest refinancing options to comply with FCA rules.
The same applies in reverse. If you have a regulated loan on your home but decide to rent it out instead, you’ll need to discuss this with your lender. They’ll explain your options and help ensure you stay within the rules.
These scenarios don’t occur very often, mainly because most bridging loans only last for 12 months.
But changing how you will use the property will affect your exit, if that involves remortgaging.
In simple terms:
- A property that you live in: needs a residential mortgage
- A property that you rent out: needs a BTL or holiday let mortgage
Chat this over with your finance broker, they will be able to put a suitable plan in place.
Costs and Considerations
Bridging loans come with higher costs than standard mortgages due to their short-term nature and flexible criteria.
The main expense is your monthly interest payment, plus you’ll need to factor in arrangement fees which generally run at two percent of your total loan amount.
Every bridging loan requires a property valuation and legal work, so these costs need budgeting for too. Some lenders might also charge an exit fee when you repay the loan, so it’s worth checking this upfront.
When applying for a bridging loan you pay for your own legal fees and those of the lender.
The loan interest works a bit differently and the choices you have will depend on your lender.
Many borrowers choose to make monthly interest payments, much like a regular interest-only mortgage. However, you might prefer to roll up the interest instead, which means adding it to your loan balance and paying everything when the loan ends.
While this option frees you from monthly payments, you’ll owe more at the end because the interest compounds over time.
Let’s put this in perspective with a real example. On a £400,000 bridging loan, your arrangement fee might be £8,000. Add to this around £800 for a valuation and £2-3,000 for legal work. If you choose to roll up your interest rather than pay monthly, your final repayment amount will be higher than your initial borrowing.
Before taking out a residential bridging loan, make sure you understand all these costs and how they’ll affect your finances.
Your broker can break down the exact figures for your situation and help you decide whether monthly payments or rolled-up interest better suits your circumstances.
Read more:
The Application Process
Getting a regulated bridging loan starts with an initial chat with your broker.
You’ll discuss what you need the loan for, how much you want to borrow, and how you plan to pay it back. They’ll explain whether a bridging loan makes sense for your situation and walk you through the costs involved.
If a bridging loan suits your needs your broker will approach a lender and request a simple agreement in principle.
Your broker will ask for some basic paperwork – things like your passport or driving licence, recent utility bills, and details about your property.
From this point you’ll move forward with a formal application.
You’ll also need to show how you plan to repay the loan, which might be through selling another property or switching to a regular mortgage.
The next phase involves checking your property’s value. The lender will send out a surveyor to look at the property you’re offering as security. While this happens, they’ll also review your paperwork and financial details. If you already have a mortgage on the property, they’ll need information about that too.
After the valuation comes back and your application looks good, solicitors step in to handle the legal side. They’ll carry out searches on the property and prepare the loan documents. Once all the legal work wraps up and everything meets the lender’s requirements, they’ll release the money to your solicitor, who then transfers it where it needs to go.
The whole process usually takes between two and four weeks, though it can be quicker if you have all your paperwork ready and choose a lender known for fast completions.
Read more:
Exit Strategies
Your exit strategy – in other words, how you’ll repay your bridging loan – is one of the most important parts of your application.
Lenders need to see a clear, workable plan for paying back the money they lend you.
Most people repay their bridging loan by selling their current property. If this is your plan, you’ll need to show the lender that your property should sell within the loan term. Getting professional valuations and researching recent sales in your area helps prove your property’s value and how quickly it might sell.
Some borrowers plan to switch to a regular mortgage to repay their bridging loan. This works well if you can show you’ll qualify for that mortgage when the time comes. You might already have an agreement in principle from a mortgage lender, which strengthens your case.
Other sources of repayment might include money coming from an inheritance or the maturity of an investment. In these cases, you’ll need evidence of when you’ll receive the funds and how much you’ll get.
Whatever your main exit strategy, always have a backup plan.
Property sales can take longer than expected, or mortgage applications might hit snags. Your backup might be selling another asset, using savings, or having a family member who can help if needed. Having this safety net makes lenders more confident about your loan and could help you secure better terms.
Remember to be realistic about timelines.
If you think your property will take six months to sell, don’t choose a three-month loan term (or a six-month loan term). Build in some extra time to handle any unexpected delays.
Read more:
Working with a Broker
Working with a broker makes a big difference when you’re looking for a regulated bridging loan.
Many lenders only work through brokers, giving you access to options you wouldn’t find on your own.
Your broker spends their days talking to lenders, so they understand who offers the most competitive rates and which ones process applications quickest. They’ll also know about any exclusive deals not available to the public.
Beyond just finding you a loan, brokers handle much of the heavy lifting.
They’ll sort through your paperwork, package your application in the way lenders prefer, and keep everything moving forward. If any issues pop up during your application, they’ll know how to solve them because they’ve seen similar situations before.
Let’s say your income is a bit complex, perhaps because you’re self-employed or have multiple income streams. A broker knows which lenders are most likely to understand your situation and approve your loan.
Remember, getting a bridging loan involves quite a bit of paperwork and back-and-forth with lenders. Having a broker manage this process saves you time and stress while improving your chances of approval at the best possible rates.
Next Steps
If you’re considering a regulated bridging loan, start by working out exactly how much money you need.
Take time to plan your exit strategy carefully – this will be key to your application’s success. You’ll also want to begin gathering essential paperwork before speaking with a broker about your specific options.
Remember that while regulated bridging loans can solve property funding problems, they’re not the right choice for everyone. It’s worth taking time to fully understand both the costs and risks before moving forward with any decisions.
Want to explore whether a regulated bridging loan could work for your situation?
Speaking with a qualified broker will help you understand your options. They’ll explain everything clearly and help you make an informed choice that suits your circumstances.
FAQ
Our minimum loan size is £150,000.
Yes, if the property will be your main residence. You’ll need to complete within the auction’s timeframe (usually 28 days).
Read more: How to Finance an Auction Property
Most lenders offer up to 75% of the property’s value.
Yes, you’ll need a solicitor to handle the legal aspects. Both you and the lender will need legal representation.
Read more: Do I Need a Solicitor for a Bridging Loan?
Monthly interest means paying interest each month. Rolled-up interest adds to your loan balance and is paid at the end.
Read more: How Do Bridging Loan Interest Options Work?
Yes, all regulated bridging loans fall under FCA supervision, giving you consumer protection.
Yes, though the lease must have sufficient years remaining to satisfy the lender.
No, regulated bridging loans are for properties you or your family will live in. For rental properties, you need an unregulated loan.
Read more: What Are Unregulated Bridging Loans and How Do They Work?
Yes, self-employed applicants can get regulated bridging loans.
Read more: How Self-Employed Borrowers Can Access Bridging Finance
