Regulated bridging loans are better for lower-priced loans with a longer lead time, whereas unregulated bridging loans are better for quick, high-cost transactions.
Bridging loans are short-term loans designed to “bridge the gap” between property investments.
However, choosing the right type of bridging loan—regulated or unregulated—depends on your circumstances.
What is a Regulated Bridging Loan?
A regulated bridging loan is secured against a residential property where the borrower (or a close family member) either currently lives or intends to live.
These loans are monitored by the Financial Conduct Authority (FCA), meaning they come with stricter terms but greater consumer protection.
Common Uses for Regulated Bridging Loans Include:
- Buying a new home before selling the current one (preventing chain breaks).
- Purchasing a property at auction.
- Renovating a residential property before securing a long-term mortgage.
- Securing funds quickly in urgent situations.
Pros of Regulated Bridging Loans:
- Better consumer protection – FCA oversight means fair and consistent lending practices.
- Structured agreements – Clear terms and conditions.
- Lower interest rates – Compared to unregulated loans.
Cons of Regulated Bridging Loans:
- Longer application process – Due to strict regulatory checks that may take extra time.
- Lower loan amounts – Lenders may be more cautious.
- Less flexibility – More restrictions on eligibility and use cases.
What Is An Unregulated Bridging Loan?
An unregulated bridging loan is used for property transactions or investment purposes. These loans are not regulated by the FCA, meaning they come with fewer restrictions but higher risks.
Common Uses for Unregulated Bridging Loans:
- Buying commercial or investment properties.
- Funding property developments or refurbishments.
- Buying properties at auction, otherwise known as auction finance.
- Expanding a property portfolio.
Pros of Unregulated Bridging Loans:
- Faster access to funds – Fewer regulatory checks mean quicker approvals – sometimes within 2 weeks.
- More flexible terms – Borrowers have greater control over loan conditions and these can be negotiated.
- Higher loan amounts – Less restrictive lending criteria, with many bridging lenders offering up to £2,000,000 with an LTV of 60%+.
Cons of Unregulated Bridging Loans:
- Higher interest rates – More risk means higher costs.
- No FCA protection – Borrowers assume more responsibility, so terms need to be checked more closely.
- Greater risk – Lenders may impose stricter repayment terms and penalties at their own descretion.
Key Differences: Regulated vs. Unregulated Bridging Loans
| Feature | Regulated Bridging Loan | Unregulated Bridging Loan |
|---|---|---|
| Regulated by FCA | Yes | No |
| Purpose | Residential property (borrower or family lives in it) | Commercial, investment, or business use |
| Loan Speed | Slower due to regulatory checks | Faster with fewer restrictions |
| Consumer Protection | High – FCA oversight | Low – No FCA protection |
| Loan Flexibility | Less flexible | More flexible |
| Typical Loan Term | Up to 12 months | Up to 24 months |
| Interest Rates | Lower | Higher |
Regulated vs. Unregulated Loans: Which One is Right for You?
Choosing the right bridging loan depends on your financial needs, property type, and risk tolerance.
If you need funding for a residential property where you or a family member will live, a regulated bridging loan is likely the best option, as it offers consumer protection.
On the other hand, if you are an investor, developer, or business owner looking for flexibility and faster access to funds, an unregulated bridging loan may be more appropriate.
Speaking to a financial expert or bridging loan specialist can help you make an informed decision that means you can easily meet your financial goals.
Exit Strategy – Why It’s Important
Both regulated and unregulated bridging loans are short-term solutions, so lenders will want a clear exit strategy—how you plan to repay the loan.
Common exit strategies include:
- Sale of the property (most common for regulated loans).
- Refinancing into a long-term mortgage (especially for investors using unregulated loans).
- Proceeds from a business venture (for commercial borrowers).
Without a solid exit strategy, securing a bridging loan can be difficult, and failing to repay could lead to repossession.
Cost Breakdown – What Fees Should You Expect?
Aside from interest rates, borrowers should be aware of the extra costs associated with bridging loans.
Bridging loan fees regularly include:
- Arrangement fees – Typically 1-2% of the loan amount.
- Exit fees – Some lenders charge a fee for early repayment. As upfront if this is a charge they will impose.
- Valuation fees – Property assessments to determine lending risk. This includes surveyors.
- Legal fees – Covering solicitor costs for loan agreements.
Can You Switch from Unregulated to Regulated?
Some borrowers start with an unregulated loan for speed and then refinance into a regulated mortgage once the property is secured.
Refinancing an unregulated bridging loan is a common tactic used by investors to help them pay it off quickly.
Re-financing means they not only get access to the money fast up-front, but they can take advantage of longer term times and lower interest rates through alternative loans.
See our guide: How to remortgage after a bridging loan
Unregulated vs Regulated Bridging Loans, Which Is Better?
If you are a homeowner looking for a short-term loan, a regulated bridging loan is likely the safer choice.
However, if you are a property investor or developer, an unregulated bridging loan could offer the speed and flexibility you need.
For tailored advice, consult a bridging loan expert or bridging loan broker who can help match you with the right lender.
If you are looking for bridging loans between £250,000 – £2,000,000 with funds available within 2 weeks, call Blue Square Capital on 020 3912 8360 and get your free, no obligations consultation today.
