Is Bridging Finance Regulated?

Bridging Finance, Information

Regulated Bridging Finance

Written by Jamie Gillispie

When exploring financial solutions for purchasing or refurbishing properties, you might come across different types of bridging loans. At Elleah Property Finance, we provide clear insights into the world of bridging finance, specifically focusing on regulated and unregulated bridging loans. Understanding these can significantly impact your borrowing experience and financial planning.

Regulated bridging loans are a type of short-term finance primarily used in the residential property market. These loans are overseen by the Financial Conduct Authority (FCA), ensuring a layer of protection for consumers. Typically, a regulated bridging loan is used to “bridge” the financial gap when purchasing a new residential property before the sale of an existing property is completed.

Why choose regulated bridging finance? It offers a safeguarded borrowing experience, as lenders must comply with strict regulations that protect the borrower. This type of loan is suited for individuals or families planning to occupy the property themselves or use it as a primary residence. Below are some use cases –

1. Buying a New Home

If you’re looking to buy a new home before selling your current one, regulated bridging finance can provide the necessary funds to bridge the gap between purchasing the new property and selling the existing one. This can be crucial in avoiding delays and ensuring that you do not miss out on the property you want to purchase due to timing issues with sales.

2. Downsizing or Upsizing Your Home

Regulated bridging loans can be particularly useful for those looking to downsize or upsize. This scenario often involves timing challenges, as the sale of the original property may not align perfectly with the purchase of the new one.

3. Preventing Chain Breaks

In a property chain, each sale is dependent on the completion of other sales. If one link in the chain breaks (e.g., a buyer pulls out), a regulated bridging loan can provide a financial stopgap, allowing the remaining transactions to proceed while alternative arrangements are made.

4. Buying a property at Auction

Properties bought at auction typically require payment completion within a short timeframe (usually 28 days from the auction date). A regulated bridging loan can be used to secure the property quickly, with the intention of refinancing to a longer-term mortgage solution later.

5. Property Renovation and Conversion Projects

For properties that will be inhabited by the borrower or family members post-renovation or conversion, regulated bridging finance can be used to fund the purchase and the necessary works. Once the renovations are completed and the property increases in value, a more traditional mortgage can be arranged.

6. Settling Tax Liabilities or Other Urgent Costs

Sometimes, property owners face urgent and significant expenses such as tax liabilities. Regulated bridging loans can provide a quick influx of cash secured against a residential property, giving the owner time to arrange for more permanent financial solutions.

Key Considerations

When considering a regulated bridging loan, it’s important to have a clear and viable exit strategy in place, as these loans are meant to be short-term solutions with typically higher interest rates than conventional mortgages. The exit strategy usually involves either selling the property or refinancing to a long-term debt instrument.

Unregulated Bridging Finance

On the other hand, unregulated bridging loans are not governed by FCA rules and are typically used for commercial properties. Investors seeking to purchase commercial properties, land for development, or large-scale investment projects often utilize unregulated bridging loans. These loans offer more flexibility in terms of loan structure and repayment terms, catering to the specific needs of property investors or property developers. 

Though unregulated, these loans still require a strategic approach due to their complex nature and the higher levels of risk involved. Unlike regulated loans, the eligibility and terms for unregulated bridging finance can vary more significantly between lenders, which is why working with a seasoned broker like Elleah Property Finance can be invaluable. We help navigate these waters by connecting you with the right lenders and structuring deals that align with your investment goals.

Elleah Property Finance: Your Partner in Bridging Finance

At Elleah Property Finance, we specialise in both regulated and unregulated bridging loans. Our expert team is dedicated to understanding your specific needs and providing tailored advice and solutions that help you make informed decisions. Whether you’re bridging to buy your next home or to expand your commercial property portfolio, we are here to guide you every step of the way.

If you’re considering bridging finance, contact us today to discuss your options and how we can assist you in securing the financing that best suits your circumstances.


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