What is the difference between unregulated and regulated bridging finance?

Bridging finance is a popular form of corporate finance for many professional property developers, property investors, and homeowners because of the flexibility it provides. 

Bridging loans are classified as either regulated or unregulated. In all circumstances, lenders will want security, most often a first or second charge against the borrower’s property. A clear exit strategy is also required, as is understanding of the danger that the security will be repossessed if the loan is not returned. 

Bridging finance interest rates are rather high for short-term loans, which is something to consider. If you fail to make mortgage payments, your home may be repossessed. Mortgage lenders in the United Kingdom must be regulated by the Financial Conduct Authority (FCA)

What is a regulated bridging loan? 

A regulated bridging loan is a loan secured by a property that the borrower now or plans to occupy. 

The primary distinction between this and an unregulated bridging loan is that the transaction is not for commercial interests. 

The most typical application for a regulated bridging loan is when there is a chain break. Buyers can utilise a regulated bridging loan to guarantee they can buy the new house before selling their current one. 

Aside from the property chain break, there are a few controlled bridge situations driven by the borrower’s personal circumstances with an immediate need to raise cash or rehabilitate a property before transitioning to longer term finance. 

What is an unregulated bridging loan? 

The Financial Conduct Authority, in general, does not regulate loans if the secured property or proposed acquisition is for commercial reasons. 

A business is typically regarded to be capable of understanding and assessing contracts and commitments they make, without the need for the same protection offered to consumers. 

Even with this assumption, it is critical for the company to understand what it is signing. The expectation is that a trade professional will do so with industry expertise. 

Commercial applications for an unregulated bridging loan include: 

  • Purchasing property in order to get planning authorisation before proceeding with a development 
  • Property improvement funding 
  • Quickly acquiring residential, business, and semi-commercial property 

What is the distinction between unregulated bridging loans and regulated bridging loans? 

Finding the perfect financing for you while closing on a property sale can be tricky. This is not owing to a shortage of items, but rather to the reverse. There are hundreds of licenced and unregulated bridging loans available on the market, making it difficult to find an experienced lender that suits your precise requirements. 

When it comes to bridging finance, you may choose between two sorts of loans: regulated and unregulated. But how do they vary, and how can you know which is ideal for your real estate investment? 

  • Regulated bridging loans: Used by homeowners who have run out of finances, frequently owing to delays. 
  • Unregulated bridging loans: Used by middlemen, real estate investors, and developers to ‘bridge’ a payment gap with a short turnaround. 

Why choose Veracity for bridging loan advice? 

As independent mortgage advisers, Veracity Financial Planning can offer you bridging finance deals from across the whole of the market. We work with an unrestricted network of over 500 lenders and can find you the best rates and terms on the market for your financing needs. 

If you are looking for bridging finance and would like to talk to an adviser, please contact Veracity today. 


Picture of Woody Snapper

Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586


Email: woody@veracityfp.co.uk