Regulated Bridging Loans: when the security is your own home

A regulated bridging loan is short-term property finance secured against a home that you or a close family member lives in, or intends to live in. Because the security is somebody's home rather than an investment, the loan falls under Financial Conduct Authority regulation and comes with consumer protections that ordinary bridging finance does not.

That distinction matters more than most people realise. It changes who can lend to you, how much you can borrow, what the lender has to do before agreeing, and what happens if something goes wrong. Of the 67 short-term lenders we track (our wider panel runs to over 120 lenders across all product types), only 12 offer regulated bridging at all. The rest lend against investment and commercial property only.

So the field narrows the moment the property is your home. Here is what makes a bridge regulated, what the protections actually are, what the terms look like, and where the real constraints sit.

What makes a bridging loan regulated?

Regulation is not a choice and it is not a lender policy. It is set by law, and there are three tests. All three have to be met when the contract is entered into.

You have to be borrowing as an individual, or as trustees. A loan to a limited company is not a regulated mortgage contract unless the company is acting as a trustee. A sole trader can be regulated, and in England and Wales so can a partnership of individuals.

The loan has to be secured by a mortgage over land, and the land has to be in the UK.

At least 40% of the property has to be used, or intended to be used, as a dwelling by you or by a person related to you. Wholly commercial property cannot meet that test. Mixed use property can, which is why a flat above a shop produces a regulated loan where the borrower lives in the flat.

That 40% figure is the one that catches people out on mixed use and multi-unit security. Mostly commercial with a small residential element sits outside regulation. Cross 40% with you or your family living there and it does not.

Who counts as a close family member

The definition is specific, and it is shorter than people expect. A related person means your spouse or civil partner, somebody whose relationship with you has the characteristics of a husband and wife relationship, or your parent, brother, sister, child, grandparent or grandchild.

So a loan secured on a house your adult son lives in can be regulated, even though you do not live there. A loan secured on a house your cousin, your nephew or a friend lives in is not, because those relationships are not on the list.

Second charges are regulated too

This one is widely misunderstood, and the misunderstanding is out of date rather than wrong-headed. A loan can be a regulated mortgage contract whether it is secured by a first, second or later charge. The old position, where only a first charge on a residence was regulated, changed with the Mortgage Credit Directive in March 2016.

So if you are raising money by way of a second charge behind your existing residential mortgage, on a house you live in, that is a regulated loan and it has to be arranged through a firm with the right permissions.

Why most regulated bridges run for twelve months

In the FCA Handbook a bridging loan is a regulated mortgage contract with a term of twelve months or less, or an MCD exempt bridging loan, which means one with no fixed term or repayable inside twelve months, used as temporary finance while you move to another arrangement for the property.

That is the reason almost every regulated bridge is written over twelve months maximum. A regulated loan on a home over a longer term is still regulated. It just stops being a bridging loan for Handbook purposes and different rules apply to it.

Regulated or unregulated: the difference in practice

The first row is the one that bites. Buying an investment property with a bridge is straightforward because most of the market will look at it. Raising money against the house you live in narrows the field immediately, and it narrows again once minimum loan sizes and minimum property values come into it.

A limited company is not a way round it

Because the borrower has to be an individual or trustees, a loan to a limited company sits outside the regulated regime. That does not make a company structure a way round regulation when you live in the property.

Lenders and their solicitors look hard at arrangements that appear designed to sidestep consumer protection, and a lender who works out the real position late will usually withdraw rather than carry on. If you or close family will live there, arrange a regulated loan from a lender who offers one. Putting the case accurately on day one also avoids the worst outcome, which is a withdrawal at week three of a four-week deadline.

What the regulation actually gives you

These are specific obligations on the lender and the broker, not warm words.

Your exit gets assessed properly. Where the loan is interest only, which nearly all bridging is, the lender has to have evidence of a credible repayment strategy with genuine potential to repay both capital and interest. Speculative does not count. If your exit is selling your existing home, the lender may want its own independent valuation of that house, not just the one you are buying. If your exit is refinancing onto a mainstream mortgage, the lender should not accept it unless it is reasonably satisfied a mainstream lender will actually lend, which in practice means an agreement in principle or its own income and expenditure assessment.

There is one prohibition worth knowing about. A lender cannot accept a repayment strategy based on your credit status improving enough to refinance, unless it has evidence of a guaranteed offer for the longer-term loan. That rule exists because lending on a hope rather than a plan used to be common.

A seven day reflection period. When you get a binding offer you have to be given at least seven days to think about it, and the offer stays binding on the lender throughout. You can accept earlier if you want, so it need not slow you down, but the lender cannot pull it during that window on a whim. You also have to be given a copy of the draft agreement at the start of the period.

A proper advice process. The regulated sales regime applies. A firm cannot encourage you to opt out of advice, and execution-only sales are banned outright where the main purpose is debt consolidation, where you are using a statutory right to buy, and on shared equity credit agreements. Where a sale does go ahead on an execution-only basis you have to be told clearly, in writing or on a recorded call, that nobody has assessed whether it suits you and that you do not get the protections that come with advice.

Controls on extending. If you need more time, the lender has to run an affordability assessment as though it were a new loan, and you have to actively choose to extend rather than drift into it. Where the interest rolls up, the lender has to talk through with you what the extension does to your remaining equity. That is the protection that stops a short-term loan quietly eating a house.

Every cost in writing. You get a formal illustration showing the gross loan, every fee, the retained interest, the total amount repayable and an annual percentage rate of charge. The APRC on a bridging loan looks frightening, often above 25% or 30%, because it annualises a monthly rate and crams all the fees into twelve months. It is not the rate you are paying. It is a comparison figure and it should be read as one.

Somewhere to go if it goes wrong. You can take a complaint to the Financial Ombudsman Service. On an unregulated loan to a company, generally you cannot.

What people use regulated bridging for

The regulated market exists because there are a lot of situations where somebody needs short-term money against their own home and a mainstream mortgage either cannot be arranged in time or cannot be arranged at all.

Breaking a chain. The most common use by a distance. Your buyer pulls out, or the seller above you will not wait, and a bridge lets you complete the purchase and sell your own house afterwards instead of losing the one you want. There is a fuller walkthrough in our guide to financing a chain break.

Downsizing, or buying before selling. Common for older borrowers with a lot of equity and not much income, where a mainstream lender's affordability assessment produces an answer that has nothing to do with the actual position.

Divorce and separation. Releasing equity to settle a financial order, or buying out a former partner's share, where a court sets the timetable rather than convenience.

Probate and inheritance. Paying inheritance tax, which falls due before an estate can be distributed, or buying out other beneficiaries of an inherited property. Most lenders will only lend against an inherited property once the grant of probate has come through.

Buying at auction to live in. A 28-day auction deadline is usually too short for a residential mortgage. Where you are buying it as your home the bridge is regulated, which makes it harder to arrange than an investment purchase, not easier. That is the opposite of what most buyers assume, and it is covered in more detail on our auction bridging finance page.

A property that is currently unmortgageable. No kitchen, no bathroom, significant structural problems. A mainstream lender declines it. A bridge funds the purchase and the works, and the exit is a normal mortgage once the house is habitable. More on unmortgageable property.

Home improvements and extensions, where the work has to be paid for before you can remortgage against the improved value.

Lease extensions. A short lease can make a flat unmortgageable. A bridge funds the premium, then the flat refinances conventionally once the lease is extended and the value comes back.

Tax and business obligations, including a self-assessment or corporation tax bill, where the borrower's main asset is their home.

Consumer buy to let is its own thing

If you are letting out a property you did not buy as an investment, usually an inherited house or a former home you moved out of, you may fall under the consumer buy to let rules rather than the ordinary unregulated regime. It is a separate category with its own requirements and it catches accidental landlords who assume all buy to let sits outside regulation. Worth establishing early, because it changes who can lend.

How much can you borrow?

Maximum loan to value across the regulated lenders we track runs from 65% to 80%, with most at 70% or 75% and the median around 72.5%. On headline figures that is close to the unregulated market. Three things make the real answer lower.

Gross and net are different numbers

The percentage you are quoted is almost always the gross facility. The arrangement fee and, on nearly every regulated bridge, the whole term's interest come out of it before anything reaches your solicitor.

Take a house valued at £450,000 with a twelve month facility at 70%:

A 70% headline produces 61% in your hand. At 75% you would still be looking at somewhere between 60% and 65% of value once the deductions come out. Repay at the end of the twelve months and you redeem the £315,000 gross plus the lender's redemption costs. Repay in month five and the unused interest comes back off.

So when you are comparing offers, ask what reaches your solicitor on completion. Not what the percentage is. Our bridging calculators will show you the gap on your own numbers.

Some lenders use a considered value, not the valuation

It is common for a regulated lender to take the open market value, apply its own reduction, often to around 70% of it, and then measure the loan against that reduced figure. Where that happens the loan to value you are quoted and the real loan to value against the market figure are two different numbers. Ask which one you are being given.

And it is the lower of price and valuation

On a purchase the lender advances a percentage of whichever is lower, the price or the valuation. Equity you believe you are buying is not something you can borrow against on day one.

Loan sizes and property values

Minimum loan sizes among regulated lenders run from about £20,000 at the lowest to £250,000 at the highest, with most between £50,000 and £100,000. Maximum facilities go into the millions and in a few cases the tens of millions.

Minimum property value is the one that is easier to miss. Regulated lenders commonly set a floor of £75,000 to £100,000 on the value of the security, and a house below that can be unfundable however small the loan is and however strong the borrower.

Second charges are available from two thirds of the regulated lenders we track, but the maximum drops to around 65% to 70% gross and your existing mortgage comes off that. A house worth £300,000 with £180,000 outstanding has a ceiling at 70% of £210,000, so about £30,000 of gross headroom, which nets down to considerably less once the fee and retained interest come out. Second charge capacity is usually smaller than people expect.

What regulated bridging costs

Rates

Monthly rates on regulated bridging broadly run from around 0.55% to 1% a month on a first charge, with the bottom of that going to lower loan to value tiers and straightforward security. Second charges price above first charges.

Here is something that surprises people. Regulated bridging is not automatically dearer than unregulated. Some lenders price regulated above the equivalent unregulated loan to reflect the extra process, and at least one prices regulated cheaper at every loan to value tier. Do not assume it either way, which is the argument for looking across the panel rather than at one quote. There is more on how short-term pricing works on our bridging loan rates page.

And these are monthly rates, not annual, because the terms are short. 0.85% a month is not 0.85% a year. Over twelve months it is a little over 10% of the balance before fees.

The interest is usually retained

On a regulated bridge the interest for the whole term is normally worked out at the start and held back from the advance, so you make no monthly payments at all. That suits a borrower whose income will not support monthly payments, which describes most people using a bridge to move house.

Two things to understand about it. Retained interest reduces what you receive, as the table above shows. And on a lot of products the retained sum does not come off the balance that interest is charged on, so you are charged interest on the interest. The illustration will show you the effect.

Against that, repay early and the unused retained interest comes off your redemption figure. A twelve month facility repaid in month five generally costs about five months of interest rather than twelve, subject to a minimum period that is commonly one to three months. So taking a longer term than you expect to need costs very little and removes the risk of needing an extension.

The rest of the costs

• Arrangement fee, typically 1.5% to 2% of the gross facility, deducted from the advance
• Lender administration fee, often a few hundred pounds
• The lender's legal costs, which you pay, commonly around £1,000 to £1,500 on a straightforward case, plus your own solicitor
• Valuation fee, varying with the value and type of property
• Exit fee, charged by some lenders and not others, and sometimes calculated on the gross facility rather than the balance
• Redemption costs, including the lender's legal fees on redemption and transfer fees
• Broker fee, disclosed on the illustration
• A personal visit. Some regulated lenders require one before completion, at around £100 plus VAT, carried out by an agent who meets you face to face

That last one is specific to regulated lending and it is worth planning around if you are abroad or the property is empty, because it has to happen before completion and it cannot be squeezed in at the end.

Ask for the full tariff of charges at the outset. The rate and the arrangement fee are what get quoted. The tariff is where the rest sits, including extension fees, which commonly start at 1% of the balance.

The exit gets underwritten harder than you do

On an unregulated loan the lender's main question is whether the asset supports the debt. On a regulated loan it has to go further, and the exit is where most regulated cases are won or lost.

If your exit is selling your existing home, expect questions about how long it has been on the market, the asking price, whether you have reduced it, whether you have had offers and at what level, and whether the agent's view is realistic. The lender may instruct its own valuation of the house you are selling, not just the one you are buying.

If your exit is refinancing onto a mainstream mortgage, the lender should not proceed unless it is reasonably satisfied a mainstream lender will lend when the time comes. In practice that means an agreement in principle, or enough income and expenditure evidence for the bridging lender to form its own view. A plan that depends on your circumstances improving is not acceptable without evidence of a guaranteed offer.

So a regulated bridge with a vague exit does not get agreed, however much equity sits in the house. Getting the exit evidence together at the start is the single biggest thing that speeds a regulated case up.

How long it takes, and what happens

Regulated bridging is slower than unregulated bridging, and the extra steps are the reason. Two to four weeks is a realistic expectation on a straightforward case.

The sequence runs roughly like this:

1. Terms. Indicative, and the rate can move if something new comes out
2. Application and illustration. A formal illustration setting out every cost. These are commonly valid for a short window, sometimes as little as seven days, so the figures underneath need settling before one is issued
3. Packaging. Identity, proof of address, income evidence, and evidence of the source of funds. Where a property is owned outright, lenders routinely ask where the money to buy it originally came from, which can mean going back years
4. Valuation, instructed once the case is in
5. Legal work, with the lender's solicitor and your own
6. Any personal visit the lender requires
7. Binding offer, and the seven day reflection period
8. Completion and drawdown

The three things that most often cause delay are the valuation, the source of funds evidence on a house owned outright, and the exit evidence. All three can be sorted before an application goes in.

Where regulated bridging is harder than people expect

Three situations come up again and again.

Small loans on modest properties. The regulated panel has higher minimum property values than the unregulated market and far fewer lenders, so a small loan on a lower value home can genuinely have nowhere to go even though it is a perfectly sensible request.

Borrowers living overseas. An expat raising money against a UK property they still own, or lived in until recently, is looking at a handful of lenders. Any requirement for a personal visit turns into a logistics problem rather than an admin one.

Property in Scotland. Three quarters of the regulated lenders we track will lend in Scotland, so it is available, but the separate legal system and conveyancing process mean fewer options and a different timetable. Northern Ireland is harder again.

The risks, plainly

A regulated bridging loan is secured on your home, and if it is not repaid the property can be repossessed. That is the fundamental risk and no amount of structuring removes it.

The practical risks that actually cause trouble:

• The exit does not happen on time. The sale falls through, the refinance is declined, the works overrun. Extensions are available but they cost, commonly from 1% of the balance, and they need a fresh assessment
• Retained or rolled-up interest eats into your equity if the loan runs longer than planned. That is exactly why the rules make the lender talk through the effect on your remaining equity before agreeing an extension
• The valuation comes in lower than expected, which cuts the advance and leaves you with a shortfall to find
• The cost is front-loaded. Fees come out on day one and they do not come back if you repay in month two

Short-term finance is a tool for a defined gap with a defined end. Where the end is not defined, the question to ask is whether a longer-term solution fits better, and a decent adviser should raise that with you before arranging anything.

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