Bridging finance is often described as “unregulated”, but that is only half the story. Whether a bridging loan is regulated by the Financial Conduct Authority depends on what the borrower intends to do with the property, and the answer changes the paperwork, the lender pool and the protections that apply.
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What makes a bridging loan regulated?
A bridge is generally a regulated mortgage contract where the loan is secured by a first charge on land that the borrower, or a close family member, lives in or intends to live in as a home. Where that test is met, the lender must follow the FCA’s mortgage rules (MCOB), including affordability assessments and prescribed disclosure.
Typical examples include a homeowner buying a new residence before selling the old one, or a purchaser funding a main residence that needs works before moving in. Many bridging lenders do not offer regulated products at all, so the market is narrower and the process more structured.
What is unregulated bridging?
Unregulated bridging covers loans for business or investment purposes, such as buying a buy-to-let, a commercial unit, an auction lot for resale, or land. A loan secured on a second charge over a property the borrower does not occupy would normally also fall outside regulation. Lenders in this space tend to focus on the security and the exit rather than detailed income affordability.
Why the distinction matters
- Underwriting: regulated bridges require a documented affordability and exit assessment; unregulated bridges are weighted towards the value of the security and the credibility of the exit.
- Product choice: fewer lenders operate in the regulated space, which can affect pricing and speed.
- Protections: regulated borrowers have access to the Financial Ombudsman Service and FCA conduct rules in their dealings with the lender; unregulated lending may offer less.
- Documentation: misclassifying a loan can create serious problems later, so the intended use must be stated accurately from the outset.
Exit strategy is the common denominator
Whichever category applies, a bridge is short-term borrowing and the lender will want to see how it will be repaid, usually by sale, refinance onto a term mortgage or another identifiable source of funds. Our guide to bridging loan exit strategies sets out what lenders accept and how to build in contingency, and the article on using a bridge to break a property chain shows a common regulated-versus-unregulated scenario in practice.
Costs to expect
Bridging is typically priced monthly, with arrangement fees, valuation and legal costs, and sometimes an exit fee. Interest may be serviced, rolled up or retained from the advance, which changes the total cost. Because pricing varies by loan-to-value, security type and borrower profile, a full illustration should be obtained before committing.
Practical steps
- Confirm how the property will be used, in writing, before approaching lenders.
- Agree the exit route and a fallback if timing slips.
- Check whether any other charges already sit on the property.
- Obtain a full costs illustration and compare the total payable, not just the headline monthly rate.
Our bridging and development finance hub collects our guides on each stage, and we arrange facilities for clients across London, the Midlands and beyond – see the areas we cover.
Frequently asked questions
Can a regulated bridge be used for a buy-to-let?
No. A loan to buy or refinance an investment property that the borrower will not occupy is normally unregulated, although mixed-use or family-occupation cases need individual assessment.
How quickly can a bridging loan complete?
Timescales depend on valuation, legal work and the complexity of the security. Some cases complete in a few weeks, but delays in title or valuation are common, so build in contingency rather than relying on a best-case date.
Is a second charge bridge treated differently?
Yes. The existing first-charge lender’s consent may be needed, and regulation depends on whether the borrower occupies the property. Both factors should be confirmed before an application is submitted.
What happens if the exit is delayed?
Interest continues to accrue and extension fees or default rates may apply. Discuss extension terms with the lender at the outset and keep a secondary exit route available.
Speak to a broker
If you are weighing a short-term loan, our bridging finance service can assess whether your case is regulated and approach suitable lenders. Contact us or call 02080882211.
Your property may be repossessed if you do not keep up repayments on a loan secured on it. Commercial, buy-to-let and most bridging lending is largely unregulated by the FCA, so some of the protections that apply to regulated residential mortgages may not apply.
If the loan is regulated, YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Giles Finance is a trading style of Giles Finance & Consultancy Services, authorised and regulated by the Financial Conduct Authority (FRN 726857).