Unregulated Bridging Loans
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
Unregulated bridging loans explained
What is an unregulated bridging loan?
Unregulated bridging finance is a short-term, property-backed loan which is designed to ‘bridge’ a gap in funding. A loan is unregulated if it is secured against a property that you have never, and will never reside in.
What does unregulated mean?
Unregulated refers to the fact that the loan being taken does not fall under the protection of the Financial Conduct Authority (FCA).
This means that you when taking out an unregulated loan, you will have less protection in the event of something going wrong.
The FCA rules focus on treating customers fairly in both the advice given and how the account is handled once the loan is in force.
What can unregulated bridging finance be used for?
We can provide funding for almost any purpose; the most common unregulated bridging loan uses are:
- Adding value to a property through property refurbishment
- Purchasing a property quickly
- Funding an auction purchase
- Repaying development finance
- Funding a property conversion
- Adding value to a property before selling it
Regulated vs unregulated loans
Bridging loans become regulated when they are secured against your home.
Unregulated loans are those secured against any other property or land, or those to a limited company or other type of corporate borrower.
There are three main exceptions to these rules:
Where you will occupy part of the property, the loan is unregulated if the part that you occupy is below 40% of the total internal area.
If you don’t occupy the property, but ever have or you may in the future, the loan is still regulated, even though you don’t currently reside there.
Finally, second charge loans for business purposes are unregulated, even if they’re secured against your own home.
Key product features
Key features
| Max LTV | Up to 80% |
| Interest rate | From 0.43% per month |
| Charge types | 1st, 2nd & 3rd considered |
| Term | 1-36 months (maximum 12 months for regulated loans) |
| 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
Unregulated bridging finance criteria
Criteria
Below are the main criteria points:
– Up to 80% Loan to Value (or 100% with additional security).
– Property in a poor state of repair considered.
– Rates from 0.43% per month.
– Loans from £25,000 with no maximum loan size.
– Borrow from 1 month up to 24 months.
– Interest can be rolled into the loan.
– We will consider any exit route.
– Adverse credit accepted.
Security
We can consider any security type including residential property, semi-commercial, commercial, portfolios and land.
Uninhabitable property and property that will be refurbished, converted or extended are acceptable.
Who can apply?
We can lend to individuals, partnerships, LLPs, Ltd companies as well as offshore companies, trusts and pensions.
UK nationals, foreign nationals, expats and overseas investors are all acceptable.
How much can I borrow?
What is your minimum and maximum loan size?
We can fund loans between £25,000, with no maximum size.
What LTV can you offer?
We fund unregulated residential bridging loans up to 80% loan to value (LTV), and can even lend up to 100% LTV with additional security. Your LTV may be slightly reduced if you’re taking a refinance bridging loan.
Unregulated bridging loan rates & costs
Interest rates
We can offer loans from 0.43% per month up to 50% LTV and can even lend at 0.65% per month at 75% LTV.
Fees
On top of the interest, there are a number of fees to pay when taking out a bridging loan:
Lender arrangement fee – These fees are charged by the lender and usually sit at 1-2% of the loan amount. This fee is usually added to the loan, although you’re able to pay it on completion should you choose to.
Broker fees – Most brokers charge a fee for their service, often around 1-1.5% of the loan amount. This is usually payable when the loan completes, although some charge upfront, on application. We don’t charge a fee for our service, which can represent a significant saving.
Lender exit fees – Although this is becoming less common, many lenders charge exit fees when the loan is repaid. This fee is usually the cost of 1 month’s interest.
Valuation fee – This fee is payable near the beginning of the application process and can vary depending on the value, type and location of the security property.
Legal fees – These fees are payable in 2 parts – the first before legal work begins and the balance on completion. You will be expected to meet both your own and the lenders legal costs.
How can I get a better deal?
Lender’s price their applications based on the risk presented to them. Generally, the lowest risk applications are those at 50% LTV and below.
The higher the loan to value, the higher the rate paid.
To reduce your rate, the best approach would be to reduce the loan required, or to offer additional security where possible. This will reduce the risk to the lender and open the door to reduced pricing.
Applying for a non-regulated bridging loan
What documents will I need to provide?
Each application is different, but in general, you will need to supply the following:
- An application form
- Proof of ID & address
- Details of any planned works to the property
- Proof of your chosen exit strategy
How long do they take to complete?
Unregulated bridging finance can be completed very quickly, sometimes within a day or two of application.
Usually, a completion of 5-14 days is realistic, depending on the lender used. If you’re looking to secure the lowest rates, it is a good idea to allow slightly longer for completion as the lender will generally insist on more stringent criteria checks.
Can I get an unregulated bridging loan?
As there are fewer rules for unregulated loans and more lenders in the market, there is increased competition between lenders. This has led to more flexible criteria, which is a big benefit to borrowers.
As such, its likely that we’ll be able to offer you a suitable loan, even if your circumstances are not perfect.
FAQs
Should I be warier when dealing with an unregulated lender?
Although you should always undertake due diligence on the lender that you’re looking to borrow from, it’s even more important when taking out an unregulated loan.
There are a lot of new bridging lenders entering the market all the time and it’s important that you work with the right ones.
Although it’s rare for a lender to be fraudulent, there are often terms included in the contracts that could come back to haunt you.
Although we offer unregulated bridging finance, we are an FCA regulated broker and we strive to treat all our customers with the same level of care whether their application is regulated or unregulated.
What are the benefits of an unregulated loan?
There are a lot more unregulated lenders than regulated, meaning you have a wider choice when taking out this kind of finance.
In addition, there is less restriction around the term offered, unlike regulated loans, terms over 12 months are commonly available.
Finally, there is more scope for lenders to base LTV decisions on the open market value of a property rather than the purchase price.
How can I ensure I’m protected when working with an unregulated lender?
Undertaking research on the is a great start.
If you’re still uncomfortable working with an unregulated lender, you could look to work with a regulated broker, to ensure you’re well looked after.
Although the loan would still be unregulated, as FCA brokers, we hold ourselves to a higher standard and will be able to provide clear complaints procedures.