A short guide covering the key differences between regulated and unregulated bridging loans, for more informed decision-making.
A short guide covering the key differences between regulated and unregulated bridging loans, for more informed decision-making.
The use of bridging loans has been steadily growing, with loan books reaching a record £8.1bn1 high in 2024. From purchasing investment assets to preventing a property chain break, they offer developers, investors and homeowners a fast, flexible solution across the full spectrum of property transactions.
Depending on the transaction, the loan will either be a regulated bridging loan or an unregulated bridging loan. In this article, we cover the essentials of bridging finance before examining the key differences between regulated and unregulated bridging loans, when to use each type and the pros and cons of both.
If you want to see what you can borrow on bridging finance, use Brickflow’s bridging loan calculator and instantly see if your deal stacks against live borrowing options.
Head to our bridging finance page for a more in-depth look at bridging loans and how they work.
Bridging loans are short-term, secured loans that can be arranged quickly and are primarily approved based on the borrower’s exit strategy. As a temporary funding solution, they commonly bridge the gap between buying and selling/refinancing a property.
Typical exit strategies include:
Interest is charged daily, so you only pay for what you use, and it’s typically rolled up and paid at the end of the loan, or deducted upfront from the gross loan. Since it's rolled-up, the interest is compounded (pay interest on interest), so you pay more than if you pay monthly. Serviced bridging loans do exist, but are much less common with lenders.
Find out more about interest charges and bridging loan costs.
A regulated bridging loan is intended for borrowers who are securing the loan against their current home, or against a property they intend to live in. As such, they are subject to regulatory standards set by the Financial Conduct Authority (FCA), which ensures regulated bridging lenders comply with specific laws designed to protect borrowers.
Key features and characteristics:
All regulated bridging loans are overseen by the FCA in the UK.
Compliance and regulatory considerations: Because regulated bridging loans are secured against the borrower's home or future home, they offer the same protection as a homeowner mortgage.
This means anyone taking out a regulated bridging loan will be protected by the FCA if they are sold an unsuitable product or receive incorrect advice from lenders or brokers and may, in some cases, be eligible for compensation.
Some examples include:
Lower rates: Regulated bridging loans typically involve less risk for lenders, so can have lower rates than unregulated bridging loans.
Here’s a quick look at the key differences:
|
Regulated Bridging Loans |
Unregulated Bridging Loans |
|
|
Uses |
Residential property that the borrower or their family live in/will live in |
Commercial properties, residential properties, mixed-use, business purposes, property investment, BTL, HMO |
|
Arrangement Time |
4 - 6 weeks |
Typically 2 weeks, but can be as quick as a few days |
|
Loan Size |
Determined by the security and exit strategy — for example, where a borrower is refinancing with a mortgage, the regulated bridging loan lender won’t exceed the mortgage offer. |
Determined by the security and exit strategy. Some lenders on the Brickflow platform can arrange loans up to £100m on a case-by-case basis. |
|
Term |
Up to 12 months |
Up to 24 months, with 12 months being the most common. Some lenders on Brickflow offer 30 or 60 month terms in certain circumstances. |
|
Rates |
Tend to be lower than unregulated bridging due to the lower perceived risk to lenders |
Tend to be higher than regulated bridging |
Choosing between a regulated and unregulated bridging loan depends on your specific situation — rather than choosing your loan type, it will be determined by what you are using it for.
Some things to consider:
Working with a specialist bridging loan broker can help you to secure the best loan for your circumstances. Brickflow’s intermediary partners are amongst the best in the UK and can secure the right loan for you in a single digital journey on the Brickflow platform.
For the fastest, most accurate way to find out what you can borrow and what it will cost, run your numbers through our live bridging loan calculator.
Unless you shop around, it’s impossible to find the best deal for your needs. Likewise, it’s impossible to know if your next property investment is viable without knowing the actual cost of your finance.
Brickflow enables you to search the breadth of the bridging market, instantly, including banks, challenger banks, non-banks and specialist lenders.
With your intermediary, you can then go on to secure the best loan for your property investment in a single online journey.
It’s this simple:
Modelling your deal against live market loans could save you tens or hundreds of thousands of pounds, so before every project, search on Brickflow — it takes seconds.
Regulated and unregulated bridging loans can facilitate a vast range of property transactions. Understanding the benefits and limitations of each type of bridging loan can help inform your decision-making process.
Checking your finances is key to any successful property investment, whether it’s your next home or your next development project. For the quickest, most comprehensive financial due diligence, run your numbers through Brickflow’s live bridging comparison tool.