Regulated Bridging Loans

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Gary Hemming

Author: Gary Hemming CeMAP CeFA CeFA CSP

20+ years experience in bridging loans

What is a regulated bridging loan?

Regulated bridging finance is a form of short-term, property-backed loan which is secured against the borrower’s home. They are often used to fund the gap between the sale of an existing property and the purchase of a new one.

When you need to raise money quickly to secure your perfect home, these loans could well be the right option for you.

To find out more, get in touch and we’ll give you a personalised illustration, breaking down the actual rate charged, overall cost, monthly payments (where there are any), amount borrowed and any early repayment charges.

What does ‘regulated’ mean & how does this affect me?

The term regulated when discussing bridge loans means that the loan is regulated by the Financial Conduct Authority (FCA).

The FCA are a regulator for financial services and aims to protect consumers, enhance the integrity of the industry and promote competition in the interests of consumers.

All of this means that when taking a regulated bridging loan, you are subject to a higher level of protection from unscrupulous lending practices. These rules are only in place to protect personal borrowers and don’t apply to investors or business borrowers.

These regulations are in place for a property that is to be lived in, or has ever been lived in by the applicant or a close relative.

What can a they be used for?

The most common use is purchasing a property before an existing home is sold. That said, there are many other common uses, the main ones being the following:

  • Purchasing at auction – when buying at auction, there is usually a 28 day deadline for completion. As traditional mortgages can’t usually be completed this quickly, many turn to bridging as an alternative.
  • Property refurbishment – where refurbishment requires additional borrowing, or where the works are particularly heavy, some mortgage lenders may be unwilling to support you. Bridging finance can be used as an alternative to residential mortgages in this situation.
  • Extending a lease – when a leasehold property has under 60 years remaining on the lease, it may become difficult to finance and the property’s value may reduce. Bridging can be used to fund a lease extension before the property sells, ensuring you maximise your sale price.
  • Funding care fees – when moving into care, many providers require a number of months payments upfront. This can be out of reach for many and can mean moving to a less desirable care home. Bridging loans can be used to release equity for the fees, giving you a greater choice of homes.
  • Preventing repossession – funds can be raised quickly to prevent repossession. Credit problems and income are generally not an issue here if the property is to be sold.
  • Buying a partner out of the property – where a property is to be sold, or where a divorce settlement order is in place, funds can be raised to fund this.
  • Completing a fast property purchase – If you’re looking to buy a new property before you sell your current home, a bridging loan can help. They allow you to keep your property chain alive using short term finance, often securing the capital borrowed against both the new property and your old one (known as additional security). This is a tactic often used by property investors who are looking to grow their property portfolio.

Key product features

Key Features

Max LTV

Up to 75%

Interest rate

From 0.4% per month

Charge types

1st, 2nd charge

Term

1-12 months

Interest type

Added to the loan, deducted or serviced

Completion timescale

5 days – 3 weeks

Criteria

Residential, commercial property or land acceptable

Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds

Minimum applicant age 18 years – no maximum age

Available in England, Scotland, Wales and Northern Ireland

Adverse credit accepted (on a case by case basis)

Loans from £25,000 with no maximum loan size


Will I qualify?

Regulated bridging is available to borrowers who are borrowing in their own name. We can look at other structures, such as Ltd companies, trusts and pension funds where appropriate, although this is rare for regulated loans.

Can I get a bridge loan with bad credit?

Adverse credit doesn’t prevent borrowing for these loans. We’re able to fund borrowers with almost any credit problems, including current, immediate threat of bankruptcy or repossession. Mortgage arrears, CCJs and defaults will not usually prevent lending.

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How much can I borrow?

The amount you can borrow depends on several factors, with the main issue being your ability to exit the loan cleanly.

Bridging finance loan sizes

Our loans start at £25,000 and we lend with no defined maximum advance.

Loan to value

The maximum loan to value currently available is 75% LTV. This is for stronger applications, secured against a habitable property.

Exit strategy

An exit strategy is your plan on how your bridging loan will be repaid. Your chosen exit strategy is key to the success of your application– we accept almost any exit strategy, as long as it is provable and realistic.

The most common exit strategies are the sale of either the security, or another property, or refinancing the loan onto a mortgage.

Affordability guide

Affordability checks aren’t usually required, except where the exit strategy is refinancing to a term mortgage, or the interest is serviced each month.

Regulated bridging loan


What interest rate will I pay?

Interest rates start at 0.47% per month. Rates of 0.48-0.65% per month are common for relatively strong applications.

Interest rates are usually tiered based on the LTV required, with lower rates being offered at lower LTVs. The cheapest rates are usually offered on applications at 50% LTV and below.

The accrued interest is usually added to the loan (this is known as rolled up interest), with it usually being paid in a single payment at the end of the term.

Are there different interest rate types?

Products are arranged on a fixed rate or variable rate basis (variable may be connected to the Bank of England Base Rate). We’re able to offer either, depending on your preference.

As these loans are arranged over a short-term, the risk of rate changes is reduced compared to longer-term loans, but should still be considered.

What fees will I pay?

When taking out a new loan, your application will usually be subject to fees, often including some of the following:

  • Lender arrangement fee – This fee is usually between 1-2% of the loan amount and is charged when the funds are released by the lender. Larger loans are likely to be at the lower end, with smaller loans at 2%. This fee is usually added to the loan.
  • Lender exit fee – Some lenders charge an exit fee on their loans. This fee is usually between 1 month’s interest and 1.5%. We can often arrange loans with no exit fee.
  • Broker fee – Many brokers charge a fee for their service, often between £1,000 and 1.5% of the loan amount. We don’t usually charge a fee for our service.
  • Valuation fee – The valuation fee (also known as a survey fee) is a fee paid to a chartered surveyor of the lender’s choice. The cost can vary, or may even be avoided where an electronic valuation can be undertaken.
  • Legal fees – Borrowers pay both their own and the lenders legal costs. These fees vary depending on many factors.

Do I have to pay the bridging interest each month?

Interest is usually rolled into the loan and paid at the same time that the loan is repaid.

It is possible to pay the interest monthly with some lenders, although it is fairly uncommon. Where interest is to be paid each month, proof that this is affordable will be required.

How to get a regulated bridge loan on a residential property

There are 3 options available to you when looking to get this type of finance.

Firstly, you could make a list of all lenders and contact each one individually and request terms. This allows you to deal directly with the lender and avoid broker fees.

That said, it is a very time-consuming approach and if you miss a lender, may mean you’re not securing the best deal. In addition, many lenders will only accept applications for regulated loans through brokers to ensure that appropriate advice has been given.

Secondly, we allow you to compare products and apply online instantly. We’re the only company offering an instant bridging comparison based on your circumstances in the UK. Once you’ve found a suitable product, you can apply online.

We always check your application to ensure that your chosen product is suitable before submission, therefore offering you further protection.

Finally, you could discuss your circumstances with a broker. They will provide terms on the most suitable options and will be able to advise you throughout the process. We offer this service in addition to our online comparison.

Be wary of high broker fees, especially those charged upfront. We don’t charge any broker fee for bridging loans as we’re paid by the lender, meaning you won’t pay any extra when using our service.

Comparing regulated bridging loans to unregulated facilities

There may be additional information required and some checks may be more stringent than unregulated bridging finance applications.

It’s important to remember that these checks are designed to protect you and they work well.

Frequently Asked Questions

Although this is the case, many lenders will still treat an application as regulated if it is secured against your own home, or one that a family member lives in. This gives you greater protection at a cost of slightly reduced flexibility.

Yes, second charge loans are also regulated, except for very specific circumstances. Loans over £25,000 for business purposes may be classed as unregulated bridging finance.

No, where the loan meets the rules for regulation, a regulated product must be taken and an unregulated bridging loan is not possible.

Regulated bridging finance available with no minimum term and is restricted to a maximum term of 12 months.

As a guide, unregulated products (for example, those used for property development) can be taken for longer, often up to 18 months, or even 36 in some cases.

You will generally be expected to provide the following:

  • Proof of ID & residency.
  • Statements for your bank and savings accounts.
  • Proof of income (payslips and accounts for business owners).
  • Proof of your chosen exit route.
  • Details of any mortgage for accounts for second charge applications.

These loans can complete very quickly. We can arrange regulated bridging finance on the same day under extreme circumstances. Generally, it is realistic to expect your loan to complete in 5-14 days.

Yes, in most cases you can pay back the funds early without any early repayment charges.

For this type of application, many lenders won’t work directly with the public, meaning you must use an intermediary in many cases when operating in this market.

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