What are bridging loans?

Firstly, bridging loans are a short-term financial solution for financing property.

A Bridge loan’s primary function (and its most popular use) is to assist with "bridging the gap" between selling and acquiring property – yet it has many other applications.

Often, regulated and unregulated loans can be split into either:

• Residential (regulated by FCA – as the protection is for homeowners and consumers)
• Commercial (unregulated – as these loans are related to business and commercial property, or for experienced property investors to utilise)

What is the FCA (Financial Conduct Authority)?

Regulation of bridge loans and oversight is conducted by the Financial Conduct Authority (FCA), the financial sector's regulatory body. 

Their objectives are to protect the integrity of the wider UK financial system, promote fair competition and, most importantly, shield consumers and homebuyers from poor conduct from lenders, and hold lenders to account making sure the financial markets are fair for all involved.

If you need a bridge loan for a residential property, then it would be one regulated under the FCA. 

When would I need a regulated bridge loan?

If you’re a consumer, and a home buyer, you will likely need a regulated loan if: 

• You’re looking to purchase a residential property but are short of funds and are in need of a quick resolution.
• You may be looking to purchase a property at auction.
• You may have found yourself in a common occurrence, a chain break – a buyer may have pulled out of the sale of your previous house, leaving you stranded in terms of financing your next purchase. A bridge loan will free up capital, giving you time to sell the property to the right buyer and not miss out on a dream property you had your eye on, or were already in the process of the purchase when the break occurred.

The last point is the most popular usage of a bridge loan – it is a fundamental use of bridging, “to bridge a gap” in your financing. 

When would I need an unregulated bridge loan?

The key difference between regulated and unregulated is what you intend to do with the property purchase – you cannot live in a property purchased under an unregulated loan.

Unregulated loans are to secure investments for commercial purposes, these may be:

• Buy-to-let (BTL) properties
• HMO (a house in multiple occupation) property investing 
• Light or heavy refurbishment of a property such as a BTL - (from simple renovations to transforming a property from an unliveable state, or financing extensions or conversions)
• A number of business purposes – (this could include land purchasing, deposits for commercial property, or growth of the business, and resolving cash-flow issues.)

Additionally, there is no FCA protection for bridging loans used to secure investment real estate, buy-to-let investments, or commercial properties. Lenders set the terms, and even if you are converting a commercial property into a residential one it’ll will be through an unregulated loan. 

It is important to bear in mind that, while unregulated sounds concerning, it does not me that lenders will not be held to a professional and accountable standard – it simply means that it is not covered under the wider regulatory body of the FCA. 

How quickly can I secure a regulated/unregulated bridge loan?

After an application process, we can typically get you a decision in principle within a few days, depending on the complexity of your case – and of course whether it is for a residential property, or commercial property.

Lenders will often have their own terms and criteria for unregulated commercial loans, and the process could prove more complex than a regulated residential loan for the purchasing of a home to live in. 

Typically, however, it can take as little as 7-14 days for funds to appear in your account, but this can shortened or lengthened depending on the complexity of the case and the lenders criteria.

If you’re looking to finance a residential or a commercial property, contact us now

We specialise in securing market-leading bridge loans from our network of specialist lenders across the entire short-term market. We can get you a quote for a bridging loan and find the right lender to suit your specific circumstances – whether you’re a property investor looking to build your portfolio further, or a home buyer looking to downsize. 

What we can offer: 

• Both residential and commercial loans, and development property finance.
• Flexible terms (Terms from 1-36 months)
• As much as 80% LTV (more if other assets are involved)                         
• “Rolled-up” interest schemes

How we can help: 

• We can secure bridging finance for any type of borrower – limited companies, individuals (no upper age limit), sole traders, partnerships, and trusts.
• We have established relations with a network of both niche and specialist lenders
• Finance within 7 working days Depending on the complexity of a case